In the nonprofit executive benefits landscape, the selection and ongoing evaluation of plan assets — often life insurance — demands a high degree of transparency and strategic planning. Organizations and executives must be well informed of the various products available, their associated risks and how market conditions might impact performance.
This comprehensive understanding enables organizations and executives to make educated decisions that align with their risk tolerance, the longevity of the plan and goals for the organization and executive. This, combined with consistent and proactive monitoring of plan assets is what may ultimately lead them both to their desired destination.
1. Pick the Right Tool for Your Journey
When selecting a product to fund executive benefits, transparency is crucial from the outset. Whether the asset is cash, mutual funds, life insurance or another investment vehicle, understanding the nonguaranteed elements and potential risks is essential.
Several factors influence the choice of life insurance products within executive benefits plans:
- Risk Tolerance: Higher risk tolerance might favor products with greater upside potential, whereas lower risk tolerance might necessitate more conservative, fixed-rate products.
- Longevity of the Plan: Long-term plans may benefit from different products than those intended for shorter durations.
- Insurability: The insurability of the executive or participant can significantly influence the product selection.
- Market Behavior Expectations: Anticipated market performance can sway the decision toward products with varying degrees of market exposure.
2. Check Your Position on the Map Regularly
Once a product is in place, it is imperative to conduct annual evaluations. These evaluations should assess the performance of the asset, update projections and consider any changes in market conditions or interest rates that could affect the plan. Regular monitoring ensures that any adjustments needed to maintain the plan’s effectiveness are made promptly. Projections may become complex due to fluctuating interest rates, but staying informed helps avoid surprises and ensures the plan remains aligned with its goals.
3. Make Sure You and Your Guide are on the Same Path
Monitoring the financial health of the insurance carrier and ensuring transparent communication is vital. If your provider is not forthcoming with necessary information, consider the following steps:
- Request Information Directly: Reach out to the carrier directly for updated projections and details about your policy. As the policy owner or collateral assignee, you have the right to this information.
- Engage a Third-Party Review: Hire an independent third party to review your plan annually. This external perspective can provide unbiased insights and validate the information provided by your current provider.
- Consider Multiple Providers: It’s possible to work with multiple providers to ensure comprehensive oversight and access to diverse analytical tools. If necessary, changing the provider can be accomplished with relative ease, and without unwinding the entire plan.
Achieve Plan Success Through Strategy
Transparency in executive benefits is not just about prudent initial product selection but also about continuous oversight and adaptability. By staying informed and proactive, organizations and executives can safeguard their plans against unforeseen market changes and ensure they are meeting their strategic objectives.
For more detailed guidance and assistance with your executive benefits plan, reach out to our experts.We are ready to help you navigate your options and ensure you have the transparency and performance you need.
