Company-Owned Life Insurance (COLI) vs Taxable Investments as a Nonqualified Retirement Program Financing Option

  Company-Owned   Company-Owned
  Taxable Investments   Life Insurance (COLI)
Financial Structure:  
 
 » Ability to provide guaranteed minimum yield Yes   Yes
 » Ability to provide guaranteed minimum death proceeds No   Yes
 » Ability to match recorded asset value against recorded liability No   Yes
 » Ability to finance supplemental survivor benefits No   Yes
 » Enhanced death benefit in excess of account value No   Yes
 » Professional money management available Yes   Yes
 » Ability for tax-free exchange of life insurance policy N/A   Yes
   
Company Income Tax Treatment:  
   
 » Annual taxation of capital gains Yes   No
 » Annual taxation of interest Yes   No
 » Annual taxation of dividends Yes   No
 » Annual taxation of unrealized gains No   No
 » Tax on net gain at liquidation Yes   Yes, only if policy surrendered
 » Ability to borrow from account Maybe   Yes
 » Ability to borrow with little or no interest spread Maybe   Yes
 » Tax on net gain at death Yes, if funds liquidated   No
 » Tax-free death proceeds N/A   Yes
   
Accounting Treatment:  
   
 » GAAP accounting treatment FASB ASC 320-10   FASB ASC 325-30
 » Annual recognition of unrealized gains/growth No   Yes
 » Unrealized gains/losses recorded as credit/charge to earnings No   Yes
 » Recorded gains subject to tax provision Yes   No