Author Topic: After years of promising a 401K match, my company decided instead to...  (Read 2698 times)

minority_finance_mo

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Pay for Universal Life Insurance for us,

Not opposed to life insurance, mind you, but we already have term life insurance that is paid by the company (up to $250K or N yrs salary), and the average age at our company is 30 to 35.

Yesterday, they sat us on a call with an insurance salesman who tried to convince us this policy was the best thing since sliced bread because "you can add additional funds into an investment account as part of the policy" and the "earnings are tax-deferred until you take money out." (He kept comparing that to your 401K plan.)

My questions in the call:

Me: So are the funds in the investment account free to take out at any time, or they connected to the policy?

Salesman: let's schedule some time to talk about that offline. (Sir, we're in a pandemic. There is no offline.)

Me: what do you mean the earnings are tax deferred until you take the money out? Isn't that the case with a regular investment account also?

SM: no, for a regular account if you sell stock, that's taxable even if the money stays in the account.

Me: oh, okay. So can we choose which funds we want to invest in?

SM: Yes, you can choose between these 5 options. (All have ER between 1-2% + maintainable fees on the account.)

Me: what happens to the account if someone leaves the company.

SM: that's the best part, you can keep the account going and then you just have to pay the premiums yourself.

Me: is the company contributing any funds in the investment portion of the account? And are those funds available to employees if they leave the policy?

HR: Good question, let me check in on that.

Me (internally): did you numpties do any research on this before signing us up to this policy?

The Gods: no, they did not.
« Last Edit: January 28, 2021, 06:46:50 AM by Hey It's Me »

ericrugiero

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #1 on: January 28, 2021, 01:05:05 PM »
Wow, that's not even close to an efficient use of their money.  The salesman is making out like a bandit and the rest of you are getting shafted.  Good luck, I hope you can make your HR come to their senses.  Hearing stories like these makes me appreciate the folks at my company that run our benefits. 

Fishindude

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #2 on: January 28, 2021, 01:40:27 PM »
I'd say you employees got screwed on this deal.
 

alcon835

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #3 on: January 28, 2021, 01:50:38 PM »
Terrible. Not doing "What's right by the employee" at all.

minority_finance_mo

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #4 on: January 28, 2021, 09:36:32 PM »
Terrible. Not doing "What's right by the employee" at all.

Not at all. I plan on voicing my concerns to HR when I'm back to work next week.

In the meantime, one strange factor in the insurance plan was that no medical underwriting was required. Honestly, I don't know how that would even work, but have to assume we're all paying exorbitant fees as healthy young workers to compensate for the risk the insurance provider is taking by not performing a medical check on folks before signing them up. Such a busted system.

RWTL

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #5 on: January 29, 2021, 03:26:40 AM »

Salesman: let's schedule some time to talk about that offline. (Sir, we're in a pandemic. There is no offline.)


Hehe....best line.

DrinkCoffeeStackMoney

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #6 on: January 29, 2021, 12:40:48 PM »
To the OP:

Either the people running your company are idiots, or they're getting a kick back off this and do not care about their employees at all. That's pretty said when an employer would chose a Universal Life plan over a 401k. Sorry you're getting screwed.

achvfi

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #7 on: January 29, 2021, 01:02:56 PM »
To the OP:

Either the people running your company are idiots, or they're getting a kick back off this and do not care about their employees at all. That's pretty said when an employer would chose a Universal Life plan over a 401k. Sorry you're getting screwed.

This, your company management or HR leaders are getting kickbacks.

jinga nation

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #8 on: January 29, 2021, 01:34:12 PM »
if your employer is too cheap to use Guideline or Employee Fiduciary or similar, they're too darn cheap.

and yes, this is most pro-definitely a kickback scheme. my employer was approached with this option in 2017, but thankfully the owners weren't onboard with the nonsense.

Gronnie

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #9 on: January 29, 2021, 02:13:23 PM »
To the OP:

Either the people running your company are idiots, or they're getting a kick back off this and do not care about their employees at all. That's pretty said when an employer would chose a Universal Life plan over a 401k. Sorry you're getting screwed.

This, your company management or HR leaders are getting kickbacks.

Or the salesman is someones's family or friend, or likely both.
« Last Edit: January 29, 2021, 04:03:57 PM by Gronnie »

JoJo

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #10 on: January 29, 2021, 02:28:31 PM »
The plan is likely a variation on this...  https://en.wikipedia.org/wiki/Corporate-owned_life_insurance
The reason they don't do a health check is that it's guaranteed issue assuming all employees are actively at work and is contingent on the company covering everyone in the pool, not just select lives.
It is possible to set this up such that the employee effectively has control over the cash value accumulation and the employer pays the insurance charges, but then also gets the death benefits if there are any.   Taxes are based on what's taxed up front, it's possible to set this up as deferred compensation  (only pay tax when taking the $ out), somewhat similar to the way the 401k would be taxed.  But only a few choices of funds is especially bad.  And yes, some of these funds have some sort of charges that can be taken from the account/life insurance policy and be shared with the base company for administrative purposes, but there has been less of this recently due to lawsuits and bad press. 

alcon835

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #11 on: January 29, 2021, 03:34:02 PM »
Terrible. Not doing "What's right by the employee" at all.

Not at all. I plan on voicing my concerns to HR when I'm back to work next week.

In the meantime, one strange factor in the insurance plan was that no medical underwriting was required. Honestly, I don't know how that would even work, but have to assume we're all paying exorbitant fees as healthy young workers to compensate for the risk the insurance provider is taking by not performing a medical check on folks before signing them up. Such a busted system.

Yeah. They know most of you won't die or need the policy and most folks who leave won't keep it going. I can't even begin to imagine why any company would offer this.

RWTL

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #12 on: January 29, 2021, 04:52:08 PM »
To the OP:

Either the people running your company are idiots, or they're getting a kick back off this and do not care about their employees at all. That's pretty said when an employer would chose a Universal Life plan over a 401k. Sorry you're getting screwed.

This, your company management or HR leaders are getting kickbacks.

Yep - Lot's of HR departments generate "revenue" based on brokers and kickbacks related to employee benefits.

minority_finance_mo

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Re: After years of promising a 401K match, my company decided instead to...
« Reply #13 on: February 02, 2021, 01:09:18 AM »
if your employer is too cheap to use Guideline or Employee Fiduciary or similar, they're too darn cheap.

and yes, this is most pro-definitely a kickback scheme. my employer was approached with this option in 2017, but thankfully the owners weren't onboard with the nonsense.


How does a kick back like this even work? The company would pay for the insurance premiums, so can't imagine they're coming out ahead in the scheme...? In your case, would the employees have had to pay the insurance premiums?