Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
April 15, 2002 01:00 AM

Early option returns: CNA puts life insurance back into defined contribution plans

Arleen Jacobius
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    COSTA MESA, Calif. - CNA Trust is re-introducing the idea of including life insurance as an investment option in defined contribution plans.

    "It's been in plans since day one but went out of favor due to the move to daily (valuation) plans and the inability of record keepers to deal with it and the growth of mutual fund investments," said Frank Bruno, senior vice president of CNA Trust, a Chicago-basedsubsidiary of CNA Financial. "People went for what was hot and basically available."

    For the past 33 years, long before anyone thought of creating a plan around section 401(k) of the Internal Revenue Code, CNA has been handling such policies, he said.

    "Bottom line is many providers do not want to offer this due to complexity, record-keeping issues and the loss of assets in their funds," Mr. Bruno said. "To us, it's just another day."

    "It's back to the future," said Joshua Dietch, consultant with Cerulli Associates Inc., Boston. "Life insurance did not work so well in a daily valuation world and there are more reporting requirements."

    So, as mutual funds became more popular, life insurance drifted out of favor. So much so there are no readily available numbers on how much of the defined contribution asset pool is invested in life insurance, he said.

    No one promoting

    Before CNA Trust announced its new strategy, there were a few third-party administrators who could handle it, Mr. Dietch said.

    "There's no one else aggressively promoting it," he said.

    But CNA has found a way to make purchasing life insurance through a defined contribution plan like having just another investment option, CNA's Mr. Bruno said. Employees elect to direct a portion of their plan contribution into the life insurance option, called the Life Plus Account by CNA Trust. In CNA's program, deferrals must be 100% vested and only participant money can be used. The premium goes to the trust that pays the premium out of the participants defined contribution account.

    CNA's strategy is offered through a self-directed brokerage account in the plan, explained John Brown, senior vice president of CNA Trust.

    The advantage of buying life insurance is that it gives employees a way to buy life insurance with pre-tax dollars, Mr. Brown explained. It also gives people who don't think they can afford life insurance a way to purchase it, he added.

    "Individuals use their 401(k) and so they don't think it's coming out of their pocket - it's someone else's money," Mr. Brown said. "It's a good idea if you don't think you have enough coverage."

    When participants change jobs, the policy is surrendered. It can be rolled into an individual retirement account or the new employer's defined contribution plan, or participants can continue making the premium payments separately.

    Limitations

    But there are limits to the amount of money participants can invest in a life insurance investment option, said C. Frederick Reish, partner with Los Angeles-based law firm, Reish & Luftman. Participants can invest either 25% or 49.9%, depending on the type of life insurance policy that is purchased, term or whole life, respectively.

    Moreover, the value of one year's insurance coverage is taxed through to the participant each year, Mr. Reish said. However, when the participant dies, their beneficiaries would receive, if whole life, a death benefit of the cash surrender and the risk portion, which is the difference between the cash surrender and the full death benefit.

    "It's been common in the past, particularly with smaller companies," he said. "Larger companies did not offer it because they tended to provide significant benefits through a group term insurance policy."

    But it is a way for companies to provide an added benefit, especially to their higher-paid employees, and for service providers to create relations with employees with higher account balances.

    "As a practical matter, the people who have taken the most advantage are the officers of the companies, who have bought a significant amount of life insurance through their defined contribution plans," Mr. Reish said.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Private Markets
    Sponsored Content: Private Markets

    Reader Poll

    August 10, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Gaining Momentum: Where Next for Trend-Following?
    The market opportunity in U.S. residential mortgage-backed securities
    Credit Indices Evolve with Enhanced Data Inputs
    Hedge Funds 2.0: Back to the future
    How Has 2022's Carnage Reshaped Global Stock and Bond Markets?
    Crossroads: Politics, Inflation, & Bonds
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    August 1, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright Ā© 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit