Attracting Key Professionals at Minimal Cost: The Select Group Benefits Plan
Author: Alliant
Public and nonprofit universities, medical centers, and hospitals can take advantage of a unique Select Group Benefits plan (SGB) to recruit and retain management and professional staff at minimal cost with savings to both the organization and eligible staff. The SGB provides a permissibly selective death benefit/permanent life insurance coverage paid through voluntary before-tax salary reductions. The plan can be offered to a select group of management or highly compensated employees and—for nonprofit organizations—can reduce any excise tax owed by the organization.
What makes the SGB a desirable option for public and nonprofit organizations?
IRS rules permit the use of salary reduction to fund the SGB at less cost and with fewer compliance obligations or administrative requirements compared to other benefit plans, such as a 401(k) or deferred compensation. The plan may also reduce the 21% excise tax that a nonprofit would currently have to pay for its five most highly remunerated executive positions who earn more than $1 million per annum.
What makes the SGB a desirable option for eligible participants?
SGB is a desirable option for executives and, in the case of health care entities, employed and affiliated physicians, because it provides an immediate death benefit that:
- Enables participants to fund the plan with before-tax dollars, reducing their reportable taxable income for state and federal purposes.
- Provides permanent life insurance owned by the participant, who may determine the funding levels.
- Is part of a non-qualified, non-deferred compensation program that is not required to follow ERISA. As a result, every participant is allowed to obtain different benefit levels based on their individual requirements.
What are the compliance requirements?
The only requirement is a one-time e-filing with the Department of Labor (DOL) within 120 days of the commencement of the plan. The SGB is neither a qualified plan nor deferred compensation, so it is not subject to ERISA. No additional filing or annual filing and recordkeeping is required.
What administration is required?
For employed staff: Except for acceptance of the salary reduction amount and payments made to the insurance carrier on behalf of employed physicians, no other administration by the organization is required.
For medical center and hospital non-employed affiliated physicians: Enrollment, salary reductions, and funding are implemented in their entirety by Alliant and the insurer in conjunction with the affiliated physician’s practice.
What supports the legitimacy of the SGB?
- The actuarial methodology of the SGB has been patented by Lawrence Bell, an experienced tax and benefits attorney, who is the developer of the program.
- The program complies with all current requirements of the DOL and IRS.
- The SGB has been reviewed and found in compliance by major accounting organizations.
For further information, contact Bob Trobe at robert.trobe@alliant.com who works with your Alliant representative.
This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal, or accounting advice. The organization should consult its advisors before engaging in any transaction.