The significance of the plan design process in supplemental executive benefits cannot be understated. As organizations and executives navigate complex landscapes, understanding the plan’s structure and transparency requirements becomes paramount.
Transparency in Plan Design
Transparency is the cornerstone of trust between executive benefit providers and their clients — the organization and the executive. A clear, carefully considered plan design process ensures that all parties are fully aware of the terms and implications of these arrangements. This is especially crucial in scenarios involving more complex plans such as split-dollar arrangements or other executive benefit plans where lack of transparency can lead to “bad surprises,” such as missed expectations or unforeseen consequences for executives.
For instance, a common issue arises in split-dollar plans where executives unknowingly guarantee the repayment of the obligation to the organization if the underlying policies underperform. These are called recourse arrangements. Such terms should not only be clearly disclosed but also thoroughly explained to all parties involved, ensuring that there are no misunderstandings or misaligned expectations.
The Importance of Asking Hard Questions
Clients need to ask hard questions about their plans. Understanding whether the executive benefits firm is operating at an appropriate level of transparency about product performance and structure can help mitigate potential risks and increase the probability that the plan achieves its purpose. This proactive approach enables clients and their advisors to avoid the potential pitfalls that come with poorly structured agreements and incorporate these arrangements into the executive’s overall plan.
Plan Performance and Structured Agreements
A plan’s performance heavily depends on its initial design (including key assumptions) and ongoing management. Poorly designed plans can lead to increased risk, especially if they allow for early access to plan assets and do not adequately consider the policy’s long-term sustainability. Executive benefit strategies should be constructed using a conservative approach, ensuring that they are durable enough to meet long-term obligations without undue stress on the policy.
Elevate Your Financial Strategy with Expert Guidance
To paraphrase Antoine de Saint-Exupéry, a French writer and aviator: Perfection is finally attained not when there is no longer anything to add, but when there is no longer anything to take away.
A well-informed client can better navigate the complexities of executive benefits planning and ensure that their interests, as well as those of the credit union, are protected throughout the life of their plan.
If you are looking to design an executive benefits strategy that meets today’s needs and is resilient enough to withstand future challenges, it is crucial to engage experts with a client-focused approach who prioritize transparency and client education.
At TriscendNP, we are committed to providing clear and comprehensive supplemental executive benefit planning services that help you understand every aspect of your plan and its objectives.
Do not settle for less when it comes to securing your future. Learn more about how we can help you achieve your financial goals with a well-structured, transparent executive benefits plan.
