What Is COLI?
COLI is Corporate Owned Life Insurance on a group of key employees. The corporation pays the premiums, owns the cash value of the policies, and is the designated beneficiary. Each participant employee must consent to the corporation owning an insurance policy on his or her life and must be notified about the maximum amount of coverage and the beneficiary designation. COLI has proven to be a cost efficient means for companies to offset rising employee benefit costs, such as supplemental executive retirement plans, deferred compensation programs, and post-retirement medical obligations, all of which constitute a major expense for most corporations. COLI offers the following benefits to employers:
- COLI can be used as a source of funds to help support deferred compensation and other post-retirement programs.
- Policy earnings may come from growth in the account value each year and from income tax-free insurance proceeds when an employee dies.
- Policy earnings are tax-deferred.