Elevating your mission to its maximum.
Balancing limited resources with ambitious goals is never easy. But for mission-driven organizations and non-profits, achieving the highest possible return while minimizing costs is an everyday battle. At Acumen Financial Advantage, we realize every precious dollar invested is critical to funding your operations, your mission and your future.
Every dollar and client matters more.
Our unrivaled expertise in analyzing the latest market trends and tax codes alongside individual client data means we deliver solutions that are not only extremely cost-effective, but uniquely designed to foster long-term growth for your mission-driven organization.
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Solutions for Lasting Impact
Our custom strategies are aligned with our partners’ values and goals to address the unique challenges faced by mission-driven organizations. From enhancing executive retention to maximizing your ROI and charitable contributions, everything we do is designed to empower you to more efficiently achieve your goals.
Our expert advisory team is ready to tailor the right plans to your needs. Discover our complete suite of offerings below.
Executive Retention
Acumen specializes in designing, implementing, and servicing Supplemental Executive Retention/Retirement Plans (SERPs) to support your mission-driven organization. Whether you are implementing a new plan or seeking an audit of current programs, our consultative process ensures a tailored approach that aligns with the needs of your leadership and governing board, securing long-term stability and retention.
What is a non-qualified deferred compensation plan?
(And how can it benefit your organization?)
Deferred compensation plans are a promise by an organization to pay specific benefits (typically in a lump sum) to an executive in the future. This future obligation results in a benefit liability on the organization’s balance sheet and benefits expense recognition every year until benefits are vested. Once vested, these amounts are paid to the executive, placing them in control of the assets’ future performance and the resultant retirement cash flows.
These arrangements commonly involve vesting provisions where the executive must remain employed with the organization for a specified period and/or achieve specific performance goals. In non-profit organizations, once a substantial risk of forfeiture no longer exists (deemed to be upon vesting), the plan’s value is immediately includable in the executive’s income.
How it works:
The executive enters a contractual arrangement with the organization agreeing to remain with the employer to a specified date. Once the access date is attained, the organization will pay the promised benefits. These plans can be structured as i) a defined contribution plan, where the Employer defines an annual contribution, whereby the employee’s benefit equals the annual contributions plus any stated earnings. Performance is not guaranteed, meaning, the employee bears the risk of the plan. Or ii) a defined benefit plan, where the Employer defines a stated benefit to be paid at a stated future date. The risk of the plan is the employer’s responsibility, meaning, the employer is guaranteeing the benefit amount
- Pre-retirement and post-retirement rate of return assumptions are crucial to set realistic expectations;
- Given the obligation to make the payment at a future date, the organization records a benefit liability reflecting the amount projected to be due at the vesting date; and
- The organization recognizes expenses annually until the executive vests in the benefit.
Applicable
- Regulations Sections 457(f) and 409A of the Internal Revenue Code (the “Code”) govern these arrangements. The regulatory environment tends to make these plans less flexible than other options.
What is a Collateral Assignment Split Dollar (CASD)?
(And how can it benefit your organization?)
Split-Dollar is not a type of insurance but a method for two parties (often organizations and their employees) to purchase and share the benefits of one or more life insurance policies. The “loan regime” form of split-dollar, if appropriately designed, is non-compensatory and is used when the organization wants to provide retirement cash flow and death benefits. The organization pays the premiums on one or more life insurance policies. These premiums are treated as loans to the executive for tax purposes only and must be repaid with enough interest to avoid income inclusion. The organization is repaid the amount of the split-dollar funding (which may include interest) from the death benefits of the policy and the employee may access the cash value during his or her retirement years, or a specified access date. These arrangements have been used for decades as a way for organizations to retain and reward key executives.
How It Works
The organization pays the premiums on one or more life insurance policies. These premiums are treated as loans to the executive for tax purposes only and must be repaid with enough interest to avoid income inclusion. There are two competing objectives in a split-dollar arrangement. First, the organization must be repaid the amount of the split-dollar funding and, any accrued interest. Secondly, the policy or policies should also be designed to build enough cash value that the executive can access during his or her retirement years, or an access date.
- The vesting provisions under a split-dollar plan are flexible and can be tailored to the specific needs of the organization;
- Vesting in a split-dollar arrangement’s benefits results in neither income inclusion for the executive nor excise tax to the organization; and
- Split-dollar arrangements can either be fully funded at implementation or incrementally over several years. The decision to fund incrementally should be carefully considered as it does introduce interest rate (AFR) variability into the discussion.
Applicable
- Regulations Sections 7872-15 and 61-22 of the Internal Revenue Code (the “Code”) govern these arrangements.
Organization Perspective
The organization records the split-dollar loan as an “other asset.” The interest on the split-dollar loan will be accrued and reported as “other income.” The balance of the split-dollar loan (principal and accrued interest) will be adjusted, no less than annually.
Executive Perspective
Unlike the other executive retirement benefit plan options, the executive does not recognize income upon vesting. The split-dollar regulations provide that, so long as the policies are sufficient to repay the split-dollar loan and any accrued interest when it is due (typically upon the executive’s death), there is no income recognition. Should the policy or policies lapse, an income recognition event could occur. Subject to vesting and other contract terms, the executive can access policy values through life insurance policy loans or withdrawals to basis.
Key Considerations
- Retention Value
- Timing and Amount of Capital Requirements
- Impact on Financial Statements
- Flexibility
- Plan Administration Requirements
- Regulatory Environment
- Taxation
Footnotes
- Accounting for split-dollar arrangements is based on the substantive agreements, the organization’s facts and circumstances and a review of all available evidence. Organizations should obtain independent guidance on proper accounting for split-dollar arrangements.
- Defined as the appropriate applicable federal rate (AFR) in effect on the funding date.
What is a Restricted Executive Bonus Arrangement (REBA)?
(And how can it benefit your organization?)
Under an Executive Bonus Arrangement, the organization pays a bonus to the executive which is then used to purchase a life insurance policy owned by and insuring the executive’s life, with a focus cash accumulation and retirement income. Once the funds are paid to the life insurance policy as a premium, they have growth potential and may be accessed without additional taxation via either withdrawals to basis or policy loans (this treatment is contingent upon the policy avoiding a modified endowment contract (“MEC”) designation).
Under a Restricted Executive Bonus Arrangement (REBA), the employer and executive execute a contract under which the employer restricts the executive from exercising most of the ownership rights under the life insurance policy, such as accessing cash values. As a result, the executive cannot access the life insurance cash values until i) vesting in the premium bonuses, ii) reaching an access date, or iii) working for the employer for a specified number of years. If the executive leaves before being fully vested, either the lesser of any unvested portion of the bonus or the policy’s cash value is paid back to the employer. This restriction results in creating “golden handcuffs”, which encourages loyalty and motivates key executives to grow productivity.
How It Works
The executive applies for and owns a life insurance policy. In conjunction with the purchase of the life insurance policy, two additional components must be incorporated into a REBA, i) the restriction of ownership rights endorsement filed with the insurance company and ii) the REBA Agreement.
Applicable
- Regulations Sections 61-22, and 451.2 of the Internal Revenue Code (the “Code”) are the primary applicable governing sections of these arrangements.
Organization Perspective
From the organization’s perspective, payments made as premiums to the life insurance policy will be an expense and will not be recovered. The executive will own the life insurance policy, and the employer will not be a beneficiary of the policy in any way.
Executive Perspective
Income (the bonuses that ultimately result in premiums) is taxed when received or when vesting occurs. The policy provides tax-deferred growth and tax-free access to the policy’s cash value in the future. In addition, the death benefit is allotted exclusively to the executive’s beneficiaries.
Key Considerations
- Retention Value
- Timing and Amount of Capital Requirements
- Impact on Financial Statements
- Flexibility
- Plan Administration Requirements
- Regulatory Environment
- Taxation
What is a non-qualified deferred compensation plan?
(And how can it benefit your organization?)
Deferred compensation plans are a promise by an organization to pay specific benefits (typically in a lump sum) to an executive in the future. This future obligation results in a benefit liability on the organization’s balance sheet and benefits expense recognition every year until benefits are vested. Once vested, these amounts are paid to the executive, placing them in control of the assets’ future performance and the resultant retirement cash flows.
These arrangements commonly involve vesting provisions where the executive must remain employed with the organization for a specified period and/or achieve specific performance goals. In non-profit organizations, once a substantial risk of forfeiture no longer exists (deemed to be upon vesting), the plan’s value is immediately includable in the executive’s income.
How it works:
The executive enters a contractual arrangement with the organization agreeing to remain with the employer to a specified date. Once the access date is attained, the organization will pay the promised benefits. These plans can be structured as i) a defined contribution plan, where the Employer defines an annual contribution, whereby the employee’s benefit equals the annual contributions plus any stated earnings. Performance is not guaranteed, meaning, the employee bears the risk of the plan. Or ii) a defined benefit plan, where the Employer defines a stated benefit to be paid at a stated future date. The risk of the plan is the employer’s responsibility, meaning, the employer is guaranteeing the benefit amount
- Pre-retirement and post-retirement rate of return assumptions are crucial to set realistic expectations;
- Given the obligation to make the payment at a future date, the organization records a benefit liability reflecting the amount projected to be due at the vesting date; and
- The organization recognizes expenses annually until the executive vests in the benefit.
Applicable
- Regulations Sections 457(f) and 409A of the Internal Revenue Code (the “Code”) govern these arrangements. The regulatory environment tends to make these plans less flexible than other options.
What is a Collateral Assignment Split Dollar (CASD)?
(And how can it benefit your organization?)
Split-Dollar is not a type of insurance but a method for two parties (often organizations and their employees) to purchase and share the benefits of one or more life insurance policies. The “loan regime” form of split-dollar, if appropriately designed, is non-compensatory and is used when the organization wants to provide retirement cash flow and death benefits. The organization pays the premiums on one or more life insurance policies. These premiums are treated as loans to the executive for tax purposes only and must be repaid with enough interest to avoid income inclusion. The organization is repaid the amount of the split-dollar funding (which may include interest) from the death benefits of the policy and the employee may access the cash value during his or her retirement years, or a specified access date. These arrangements have been used for decades as a way for organizations to retain and reward key executives.
How It Works
The organization pays the premiums on one or more life insurance policies. These premiums are treated as loans to the executive for tax purposes only and must be repaid with enough interest to avoid income inclusion. There are two competing objectives in a split-dollar arrangement. First, the organization must be repaid the amount of the split-dollar funding and, any accrued interest. Secondly, the policy or policies should also be designed to build enough cash value that the executive can access during his or her retirement years, or an access date.
- The vesting provisions under a split-dollar plan are flexible and can be tailored to the specific needs of the organization;
- Vesting in a split-dollar arrangement’s benefits results in neither income inclusion for the executive nor excise tax to the organization; and
- Split-dollar arrangements can either be fully funded at implementation or incrementally over several years. The decision to fund incrementally should be carefully considered as it does introduce interest rate (AFR) variability into the discussion.
Applicable
- Regulations Sections 7872-15 and 61-22 of the Internal Revenue Code (the “Code”) govern these arrangements.
Organization Perspective
The organization records the split-dollar loan as an “other asset.” The interest on the split-dollar loan will be accrued and reported as “other income.” The balance of the split-dollar loan (principal and accrued interest) will be adjusted, no less than annually.
Executive Perspective
Unlike the other executive retirement benefit plan options, the executive does not recognize income upon vesting. The split-dollar regulations provide that, so long as the policies are sufficient to repay the split-dollar loan and any accrued interest when it is due (typically upon the executive’s death), there is no income recognition. Should the policy or policies lapse, an income recognition event could occur. Subject to vesting and other contract terms, the executive can access policy values through life insurance policy loans or withdrawals to basis.
Key Considerations
- Retention Value
- Timing and Amount of Capital Requirements
- Impact on Financial Statements
- Flexibility
- Plan Administration Requirements
- Regulatory Environment
- Taxation
Footnotes
- Accounting for split-dollar arrangements is based on the substantive agreements, the organization’s facts and circumstances and a review of all available evidence. Organizations should obtain independent guidance on proper accounting for split-dollar arrangements.
- Defined as the appropriate applicable federal rate (AFR) in effect on the funding date.
What is a Restricted Executive Bonus Arrangement (REBA)?
(And how can it benefit your organization?)
Under an Executive Bonus Arrangement, the organization pays a bonus to the executive which is then used to purchase a life insurance policy owned by and insuring the executive’s life, with a focus cash accumulation and retirement income. Once the funds are paid to the life insurance policy as a premium, they have growth potential and may be accessed without additional taxation via either withdrawals to basis or policy loans (this treatment is contingent upon the policy avoiding a modified endowment contract (“MEC”) designation).
Under a Restricted Executive Bonus Arrangement (REBA), the employer and executive execute a contract under which the employer restricts the executive from exercising most of the ownership rights under the life insurance policy, such as accessing cash values. As a result, the executive cannot access the life insurance cash values until i) vesting in the premium bonuses, ii) reaching an access date, or iii) working for the employer for a specified number of years. If the executive leaves before being fully vested, either the lesser of any unvested portion of the bonus or the policy’s cash value is paid back to the employer. This restriction results in creating “golden handcuffs”, which encourages loyalty and motivates key executives to grow productivity.
How It Works
The executive applies for and owns a life insurance policy. In conjunction with the purchase of the life insurance policy, two additional components must be incorporated into a REBA, i) the restriction of ownership rights endorsement filed with the insurance company and ii) the REBA Agreement.
Applicable
- Regulations Sections 61-22, and 451.2 of the Internal Revenue Code (the “Code”) are the primary applicable governing sections of these arrangements.
Organization Perspective
From the organization’s perspective, payments made as premiums to the life insurance policy will be an expense and will not be recovered. The executive will own the life insurance policy, and the employer will not be a beneficiary of the policy in any way.
Executive Perspective
Income (the bonuses that ultimately result in premiums) is taxed when received or when vesting occurs. The policy provides tax-deferred growth and tax-free access to the policy’s cash value in the future. In addition, the death benefit is allotted exclusively to the executive’s beneficiaries.
Key Considerations
- Retention Value
- Timing and Amount of Capital Requirements
- Impact on Financial Statements
- Flexibility
- Plan Administration Requirements
- Regulatory Environment
- Taxation
What is an Endorsement Split Dollar?
(And how can it benefit your organization?)
IRC 61-22: Under Endorsement Split Dollar, the employer owns the life insurance policy. The employer “endorses” to the executive the right to name the beneficiaries of all or a part of the death benefit – typically being the total death benefit minus the greater of the cash value or cumulative premiums paid. The executive pays income tax annually based on this share of the death benefit, which is known as the economic benefit cost. Typically, a “roll-out” or transfer of policy ownership takes place once an executive reaches a certain access date. Once this transfer occurs, the executive is taxed on the greater of the cumulative premiums or cash value as W2 income, which is subject to IRC Section 4960, which imposes a 21% excise tax for any compensation paid above $1M.
Endorsement split dollar plans are designed to provide valuable key person death benefits to an employer and personal death benefit protection to a key employee's family. A life insurance policy is purchased, and the premium payments and policy benefits are divided between two parties—usually a business and an employee.
How It Works
In an employer sponsored split dollar plan, sometimes called an economic benefit regime, an employer provides the benefits of a life insurance policy to a key employee by splitting the value of the policy between the employee and the company.
Under this arrangement, the employer owns the policy, pays the premium, and retains all rights to the cash values for the length of the employee’s agreed-upon tenure. The employer endorses a portion of the policy’s death benefit to the employee to ensure that his or her beneficiaries receive financial support in the event of his or her death. However, the business retains control over the policy and its cash values. The key employee pays taxes on the value of the life insurance protection, called the reportable economic benefit charge (REBC), each year.
Applicable
Businesses that implement a split-dollar life insurance arrangement must comply with Section 101(j) of the Internal Revenue Code (IRC), which applies specifically to corporate-owned life insurance policies. The Code sets specific record keeping and reporting requirements and sets limits on the amount of premiums that can be paid by the business.
Organization Perspective
- The employer pays the premiums
- May access the policy cash value
- Typically receives the greater of the cash value or cumulative premiums upon death of the executive
Executive Perspective
- Selects beneficiaries
- Receives cost effective death benefit coverage, as the employer typically grosses-up the imputed tax cost associated with this arrangement
- Typically, upon an access date, the policy ownership is transferred to the executive, whereas the executive will owe ordinary income tax on any amount that is transferred
Key Considerations
- Retention Value
- Timing and Amount of Capital Requirements
- Impact on Financial Statements
- Flexibility
- Plan Administration Requirements
- Regulatory Environment
- Taxation
What is a Switch Dollar?
(And how can it benefit your organization?)
Under Switch Dollar, the arrangement initially begins as Non-Equity Collateral Assignment Split Dollar. The employer pays the annual premium on a life insurance policy, which is owned for the executive (or executive’s trust). The policy is pledged, or collaterally assigned to the employer as collateral for repayment. Under the terms of the agreement, the employer is entitled to be repaid the greater of the cumulative premiums paid or the cash value. The death benefit in excess of the repayment amount is paid to the executive’s beneficiary. The executive pays income tax annually based on this share of death benefit, which is known as the economic benefit cost. Prior to any equity built up in the policy, the arrangement is “switched” to Loan Regime, resulting in the executive no longer being taxed under the economic benefit cost, but instead loan interest is charged at the applicable federal rate – which is typically accrued. This switch usually occurs between years 7-10.
Often in these arrangements, the employer retains the rights to the cash value and the death benefit up to the premiums paid by the employer. Sometimes, the employer earmarks an amount greater than the premiums paid. In some split-dollar arrangements, the employee has rights to any cash surrender value in excess of the employer’s contribution to the plan. If the employee pays into the plan, the employee’s beneficiaries may be entitled to an amount that’s proportionate to the employee’s premium payments.
How It Works
Again, under a switch dollar plan, the arrangement begins as non-equity collateral assignment split dollar, which is taxed under the economic benefit regime. Prior to any equity building up in the life insurance policy, the structure of the plan is converted to loan regime, thus the executive is not taxed on any gains. The executive now has basis in the policy and will enjoy the tax-deferred growth and tax-advantaged access to policy cash values.
Applicable
- Regulations Sections 61-22 and 7872-15 of the Internal Revenue Code (the “Code”) govern these arrangements.
Organization Perspective
- Annually funds the life insurance premiums
- Receives the great of the cash surrender value or cumulative premiums paid upon the executive’s death
Executive Perspective
- Selects beneficiaries
- Receives cost effective death benefit coverage, as the employer typically grosses-up the imputed tax cost associated with this arrangement
- In a high interest rate environment, if the executive is young or the policy is joint life, this is a more attractive option than loan regime split dollar.
Key Considerations
- Complex arrangement
- The switch does not happen automatically
- In a rising interest rate environment, there are inherent risks associated with this structure, as rates may be higher upon the conversion
- Any policy equity will be taxed as ordinary income to the executive, in addition to the one-year term costs for the death benefit coverage
What is a Participant Funded Split Dollar?
(And how can it benefit your organization?)
IRC 7872-15: A Participant Funded Split Dollar plan from a regulatory perspective, matches that of traditional employer funded collateral assignment split dollar plan. What makes the structure different is the life insurance policy premiums, are funded by the executive either i) reducing salary, or ii) forgoing bonuses. This reduction/forgone amount is then used to pay premiums on the life insurance policy. The net effect to the employer is either cash-flow neutral, or an improvement to the bottom line as there may be a recoupment of payroll and excise tax costs. The executive’s forgone amount funds the premiums with pre-tax dollars, the life insurance policy values grow tax deferred, and if structured properly, the distributions are received tax-free.
Under these arrangements, the employer retains the rights to the cash value and the death benefit up to the premiums paid by the employer, plus any accrued interest. The employee has rights to all cash values above the employer’s interest, and is 100% vested day 1.
How It Works
In an employer sponsored voluntary participant funded split-dollar arrangement, the employer and the employee enter into an agreement, which describes how the death benefit is divided between each party, how each party can access the cash value (if applicable) and how each party can exit or terminate the agreement. Quite often, these plans either replace or complement 457(b) plans, due to all the limitations imposed on contribution amounts, and lack of penalty free liquidity.
Applicable
- Regulations Sections 7872-15 and 61-22 of the Internal Revenue Code (the “Code”) govern these arrangements.
Organization Perspective
- Cost recovery of funds that would have otherwise been a sunk cost as cash compensation
- Recoupment of payroll costs
- May limit a compensation amount that would have otherwise caused an excise tax cost. Reducing an executive’s income via a salary reduction to less than or equal to $1 M, thus avoiding the 21% penalty
- Promotes stronger retention for key executives or employees
Executive Perspective
- Unique structure that is virtually impossible to create elsewhere
- Funds go into the plan pre-tax, grow tax-deferred, and may be accessed tax-free
- 100% vested day 1
- May include a substantial death benefit for executive’s beneficiary
Key Considerations
- The owner of the policy
- The split of premium payments (if any) to the life insurance company
- The division of equity between the parties.
What is MAXCAP?
(And how can it benefit your organization?)
MAXCAPMD is a non-qualified deferred compensation plan that employers can utilize to attract, reward, retain, and engage key executives and providers.
The difference between MAXCAPMD and traditional deferred compensation plans, is that no additional cash flow by the Employer is required. These are funds that have already been budgeted for, such as cash or bonus compensation, but are instead allocated to a more efficient compensation structure for both parties.
Plan Mechanics
The Employer and Participant restructure future compensation in exchange for a jointly owned over-funded life insurance policy. The Employer makes premium payments into the life insurance policy versus paying out cash compensation. These contributions are repaid to the Employer at the earlier of the Participant's death or end of year 15
Benefits to Participant:
- Increase net take home income by 20-25%.
- Pre-tax contributions that grow tax deferred, and are later accessed tax-free. There is no annual limit on how much $ one can defer.
- Funds are protected from creditors.
Employer
- Zero cost, fully voluntary plan funded solely by the participant.
- Will allow for recapturing of FICA and any relevant excise tax costs that would have occurred.
- Contributions are repaid to Employer at the earlier of the Participant’s death or end of year 15.
Primary Use Cases for MAXCAPMD
1. Traditional Deferred Compensation Plan
An employee of a non-profit can defer a portion of their compensation into the future. This forgone amount is instead used to fund a life insurance policy, which is jointly owned by the non-profit and employee. As a result of adjusting the way the income is paid, no income taxes are due because the money is treated as a loan under split dollar regulations. This allows the money that would have been paid towards income tax, to be allocated to the life insurance policy where funds go in pre-tax, grow tax-deferred, and are accessed tax-free. The cumulative contributions are then repaid to the employer upon the early death of the employee or end of year 15.It is a win-win for both the employer and the employee. The employee reduces the amount of taxable income, which reduces the amount of federal, state, and local income taxes that are due. The money that would have been paid in taxes, instead has the government subsidizing the employee savings plan. For the employer, what would have been a pure expense of paying salary/bonus, instead becomes an asset back on the employer balance sheet.
2. Public Service Loan Forgiveness (PSLF)
The PSLF program allows employees of a non-profit to make an income-based repayment towards their student loan. After 120 monthly qualifying payments, the balance of the loan is waived with no taxable impact. The amount of money due towards the loan is no more than 10% of taxable income.By leveraging the MAXCAPMD strategy, we can reduce the amount of income on paper, to reduce the amount of money that is paid in income tax and towards student loan payments.
3. Tax Arbitrage
MAXCAPMD can distribute 60% of the contribution after 90 days. The remaining 40% remains inside the policy to provide: i) a death benefit to the employee’s beneficiary, ii) repayment of the contributions to the employer, and iii) an additional retirement income stream. This would be the equivalent as if the employee would "pay 40%" in taxes (Federal, State, and Local). Therefore, if the employee, based on where they are located, pays more than 40% in taxes, they should want to contribute to MAXCAPMD any amount above that tax threshold. They would be able to get a net raise on any contributions over that amount within 90 days.
What is an eligible deferred compensation plan?
(And how can it benefit your organization?)
A 457(b) deferred compensation plan is a type of tax-advantaged retirement savings account that certain state and local governments and tax-exempt organizations offer employees. Think: law enforcement officers, civil servants, and university workers. When you open a 457(b), typically you set aside pre-tax dollars in the account, reducing your income. Money in the account can be invested and potentially grow until you make withdrawals, at which point you'll pay income taxes on what you take out. Depending on your employer plan there may be a Roth option, where you contribute post-tax dollars and then don't have to pay taxes when you take that money out.
The 457(b) or eligible plan, functions similarly to 401(k)s and other qualified plans. The arrangement allows both employer and employee contributions, though total contributions are limited to IRC 402(g) maximums in any given year, which are low, thus, this plan is typically partnered with another. Employees are typically 100% vested at all times.
How It Works
Governmental 457(b) Plan
Governmental 457(b) plans are sponsored by a government entity. Like with 401(k)s, your contributions are held in a trust and can't be claimed by your employer's creditors. Money saved in a governmental 457(b) can be rolled into other retirement accounts, such as IRAs and 401(k)s.
Non-governmental 457(b) Plan
A non-governmental 457(b) plan, sometimes called a tax-exempt 457(b) plan, is backed by the offering company—perhaps a college or other nonprofit. In a non-governmental 457(b), you tell your employer the percentage of your income you'd like to contribute, but the employer owns the account—not you. If that employer runs into trouble with creditors, your funds could be at risk.
Also, because the account is your employer's and not yours, you can't roll over funds from a non-governmental 457(b) plan into another retirement account and you may not have control over how the funds may be invested. And you can't take a loan backed by the funds in your non-governmental 457(b), like you can with a governmental plan. Another key difference: Whereas you could be automatically enrolled in a governmental 457(b), you have to elect to participate in a non-governmental plan.
Applicable
- Keep in mind that 457(b) withdrawals are subject to income tax and wage tax (for non-governmental plans), meaning they must be reported as taxable income on that year's tax return. Still, withdrawals can generally happen at any time penalty-free as long as you're no longer employed by the plan sponsor—or if the plan sponsor stops offering the plan.
Key Considerations
- 457(b) plans are tax-advantaged, employer-sponsored retirement plans offered to some government employees, as well as employees of certain tax-exempt organizations.
- 457(b) plans are split into 2 different categories—governmental and non-governmental—depending on whether you work for the government or not.
- Although similar to 401(k)s and 403(b)s, 457(b)s have unique features that could offer more flexibility.
What is Supplemental Insurance?
(And how can it benefit your organization?)
Supplemental insurance, also known as voluntary or ancillary insurance, is additional coverage that employees can choose to purchase to supplement their existing benefits. While employers typically offer core benefits such as health and dental insurance, supplemental insurance provides employees with optional coverage for specific needs, such as critical illness, accident, or disability insurance.
Benefits for Employers
- Enhanced Benefits: Package: Integrating supplemental insurance enriches the overall benefits package, aiding in attracting and retaining talent in a competitive job market.
- Customization Options: Supplemental insurance gives employees the flexibility to tailor their coverage to meet their individual needs and circumstances. This customization not only enhances employee satisfaction but also promotes a sense of empowerment and value within the workforce.
- Competitive Edge: Offering supplemental insurance sets employers apart in a competitive job market. It demonstrates a commitment to employee well-being and provides a valuable incentive for potential hires to choose and remain with the organization.
Benefits for Employees
- Comprehensive Coverage: Provides additional financial protection beyond basic benefits, addressing medical expenses, lost income, or critical illness-related costs.
- Financial Security: Acts as a financial safety net, alleviating the burden of unexpected expenses and allowing focus on recovery without undue financial stress.
- Reduced Financial Burden: Since fully funded supplemental insurance is provided entirely by the employer, employees do not bear financial responsibility for premiums. This lowers or eliminates out-of-pocket expenses for employees.
Conclusion
Supplemental insurance offers significant benefits for both employers and employees, enhancing the overall value of the benefits package and providing employees with essential financial protection. By understanding the advantages of supplemental insurance and working together to implement effective benefits strategies, employers and employees can create a workplace environment that prioritizes employee well-being and financial security. If you're considering adding supplemental insurance to your benefits package or exploring coverage options as an employee, we encourage you to learn more about the possibilities and take proactive steps to maximize the benefits available to you.
What is MAXCAP?
(And how can it benefit your organization?)
MAXCAPMD is a non-qualified deferred compensation plan that employers can utilize to attract, reward, retain, and engage key executives and providers.
The difference between MAXCAPMD and traditional deferred compensation plans, is that no additional cash flow by the Employer is required. These are funds that have already been budgeted for, such as cash or bonus compensation, but are instead allocated to a more efficient compensation structure for both parties.
Plan Mechanics
The Employer and Participant restructure future compensation in exchange for a jointly owned over-funded life insurance policy. The Employer makes premium payments into the life insurance policy versus paying out cash compensation. These contributions are repaid to the Employer at the earlier of the Participant's death or end of year 15
Benefits to Participant:
- Increase net take home income by 20-25%.
- Pre-tax contributions that grow tax deferred, and are later accessed tax-free. There is no annual limit on how much $ one can defer.
- Funds are protected from creditors.
Employer
- Zero cost, fully voluntary plan funded solely by the participant.
- Will allow for recapturing of FICA and any relevant excise tax costs that would have occurred.
- Contributions are repaid to Employer at the earlier of the Participant’s death or end of year 15.
Primary Use Cases for MAXCAPMD
1. Traditional Deferred Compensation Plan
An employee of a non-profit can defer a portion of their compensation into the future. This forgone amount is instead used to fund a life insurance policy, which is jointly owned by the non-profit and employee. As a result of adjusting the way the income is paid, no income taxes are due because the money is treated as a loan under split dollar regulations. This allows the money that would have been paid towards income tax, to be allocated to the life insurance policy where funds go in pre-tax, grow tax-deferred, and are accessed tax-free. The cumulative contributions are then repaid to the employer upon the early death of the employee or end of year 15.It is a win-win for both the employer and the employee. The employee reduces the amount of taxable income, which reduces the amount of federal, state, and local income taxes that are due. The money that would have been paid in taxes, instead has the government subsidizing the employee savings plan. For the employer, what would have been a pure expense of paying salary/bonus, instead becomes an asset back on the employer balance sheet.
2. Public Service Loan Forgiveness (PSLF)
The PSLF program allows employees of a non-profit to make an income-based repayment towards their student loan. After 120 monthly qualifying payments, the balance of the loan is waived with no taxable impact. The amount of money due towards the loan is no more than 10% of taxable income.By leveraging the MAXCAPMD strategy, we can reduce the amount of income on paper, to reduce the amount of money that is paid in income tax and towards student loan payments.
3. Tax Arbitrage
MAXCAPMD can distribute 60% of the contribution after 90 days. The remaining 40% remains inside the policy to provide: i) a death benefit to the employee’s beneficiary, ii) repayment of the contributions to the employer, and iii) an additional retirement income stream. This would be the equivalent as if the employee would "pay 40%" in taxes (Federal, State, and Local). Therefore, if the employee, based on where they are located, pays more than 40% in taxes, they should want to contribute to MAXCAPMD any amount above that tax threshold. They would be able to get a net raise on any contributions over that amount within 90 days.
What is an eligible deferred compensation plan?
(And how can it benefit your organization?)
A 457(b) deferred compensation plan is a type of tax-advantaged retirement savings account that certain state and local governments and tax-exempt organizations offer employees. Think: law enforcement officers, civil servants, and university workers. When you open a 457(b), typically you set aside pre-tax dollars in the account, reducing your income. Money in the account can be invested and potentially grow until you make withdrawals, at which point you'll pay income taxes on what you take out. Depending on your employer plan there may be a Roth option, where you contribute post-tax dollars and then don't have to pay taxes when you take that money out.
The 457(b) or eligible plan, functions similarly to 401(k)s and other qualified plans. The arrangement allows both employer and employee contributions, though total contributions are limited to IRC 402(g) maximums in any given year, which are low, thus, this plan is typically partnered with another. Employees are typically 100% vested at all times.
How It Works
Governmental 457(b) Plan
Governmental 457(b) plans are sponsored by a government entity. Like with 401(k)s, your contributions are held in a trust and can't be claimed by your employer's creditors. Money saved in a governmental 457(b) can be rolled into other retirement accounts, such as IRAs and 401(k)s.
Non-governmental 457(b) Plan
A non-governmental 457(b) plan, sometimes called a tax-exempt 457(b) plan, is backed by the offering company—perhaps a college or other nonprofit. In a non-governmental 457(b), you tell your employer the percentage of your income you'd like to contribute, but the employer owns the account—not you. If that employer runs into trouble with creditors, your funds could be at risk.
Also, because the account is your employer's and not yours, you can't roll over funds from a non-governmental 457(b) plan into another retirement account and you may not have control over how the funds may be invested. And you can't take a loan backed by the funds in your non-governmental 457(b), like you can with a governmental plan. Another key difference: Whereas you could be automatically enrolled in a governmental 457(b), you have to elect to participate in a non-governmental plan.
Applicable
- Keep in mind that 457(b) withdrawals are subject to income tax and wage tax (for non-governmental plans), meaning they must be reported as taxable income on that year's tax return. Still, withdrawals can generally happen at any time penalty-free as long as you're no longer employed by the plan sponsor—or if the plan sponsor stops offering the plan.
Key Considerations
- 457(b) plans are tax-advantaged, employer-sponsored retirement plans offered to some government employees, as well as employees of certain tax-exempt organizations.
- 457(b) plans are split into 2 different categories—governmental and non-governmental—depending on whether you work for the government or not.
- Although similar to 401(k)s and 403(b)s, 457(b)s have unique features that could offer more flexibility.
What is a Super Roth Life Insurance Policy?
(And how can it benefit your organization?)
A Super Roth Life Insurance ( Super Roth LI) policy is a specially designed life insurance policy focusing on cash accumulation and tax-free retirement income. Whether it is a dividend paying whole life or universal life, the policy is structured to maximize the living benefits to the policyowner.
What Makes a Super Roth LI policy different from the run of the mill policy? Design. Not all life insurance policies are structured with the correct intent. Most focus on the death benefit aspect, which increases internal costs, leaving the inside cash build inefficient. Our policies are designed to keep the internal costs as low as possible, thus allowing the internal inside build-up to grow effectively and efficiently over time. These plans are funded with after-tax funded dollars, and the inside build-up grows tax deferred and can be accessed tax-free while living.
Key Benefits to Employees:
- Tax-Free Growth and Access to Funds: The cash value within the Super Roth LI grows tax-deferred and can be accessed tax-free.
- Diversification of Policy Type: There are two applicable policies
- Whole Life: Which offers steady consistent non-correlated growth of the cash values through an insurer's guarantees and dividends.
- Universal Life: Which offers two different structures
- Separate Accounts: Similar to other investments, you can choose funds based on risk profile and time horizon. These policies require active management as you may lose value. That said, they offer the most upside potential.
- Indexed Life: Cash value growth mirrors external equity index, but protects your values from loss through a guaranteed return (floor) of typically 0%. The trade off for this guarantee is the upside is limited by a cap, anywhere from 10-15% depending on the year.
- Supplemental Retirement Income: Policyowners can access the cash value at any point, providing a flexible source of liquidity and tax-free income. However, the policy must be adequately funded and properly managed to avoid lapsing or triggering tax consequences.
- Death Benefit for Family Security: The policy includes a death benefit, ensuring financial support for the employee’s beneficiaries.
- Customizable and Flexible: Super Roth LI policies offer flexibility in premiums and benefit amounts, which can be tailored to individual circumstances and financial goals. Whole life is slightly less flexible than the universal life cousins, but does offer more stability.
Key Benefits to Tax-Exempt Organizations
- Attractive Executive Retention Tool: Super Roth LIs can serve as a valuable retention tool as not all providers are familiar with structuring life insurance policies in this manner, nor may they have access to the proper insurance carriers. There are also instances where the employee may not have to go through a typical underwriting process, so long as enough people sign up.
Applicable Codes
- IRS Code Section 7702: Proper structuring under Section 7702 ensures that the policy retains its tax-advantaged status. Failure to comply could result in the policy being treated as a Modified Endowment Contract (MEC), which alters its tax treatment.
Increasing Yield
Acumen’s Institutional Investment Team offers expert strategies to help mission-driven organizations maximize returns and utilize resources effectively. From Corporate Owned Life Insurance and Institutionally Priced Annuities to Structured Products and market exposure, we provide a comprehensive suite of investment solutions designed to optimize your financial outcomes and advance your mission.
What is Employee Benefits Pre-Funding?
(And how can it benefit your organization?)
Employee Benefits Prefunding (EBP) is a strategy used by organizations, including tax-exempt entities like non-profits, to set aside or invest funds in advance to cover future employee benefit obligations. This proactive financial planning approach is designed to ensure that funds are available when benefits such as health insurance, retirement plans, or other post-employment benefits come due.
Key Features
- Prepayment of Obligations: Funds are allocated in advance to meet future liabilities.
- Investment Opportunities: Funds can be invested to generate returns, often in accounts or vehicles aligned with the organization's risk tolerance and goals.
- Budgetary Stability: EBP creates predictability in managing benefits-related expenses over time.
- Compliance: For tax-exempt organizations, EBP arrangements must align with IRS regulations, ensuring investments are appropriate and maintain the organization's exempt status.
Key Benefits for Tax-Exempt Organizations
- Enhanced Financial Security: Prefunding reduces the risk of being unprepared for rising benefit costs, ensuring obligations to employees are met without straining operational budgets.
- Cost Savings: By investing prefunded amounts, organizations can offset future liabilities with returns, potentially reducing overall costs associated with providing benefits.
- Cash Flow Management: Prefunding helps smooth out cash flow by avoiding sudden, large payouts for benefits during times of financial uncertainty.
- Employee Retention and Recruitment: Demonstrating a solid commitment to employee benefits through prefunding can enhance an organization’s ability to attract and retain top talent in a competitive market.
- Mission Alignment: By securing funds for employee benefits, tax-exempt organizations can allocate other resources more predictably toward their mission-driven activities.
- Reduced Volatility: Prefunding mitigates the impact of economic fluctuations or unexpected cost increases in benefit programs, creating stability in the organization’s financial planning.
Considerations
- Regulatory Compliance: Tax-exempt organizations must ensure prefunding plans adhere to IRS and other regulatory guidelines.
- Governance: Proper oversight and reporting are essential to maintain transparency and accountability.
- Investment Strategies: Investments should be managed conservatively to align with the organization’s fiduciary responsibilities and risk tolerance.
By implementing an EBP strategy, tax-exempt organizations can better balance their financial commitments, maintain operational stability, and support their mission sustainably over the long term.
What is NCUA Regulation §701.19?
(And how can it benefit your credit union?)
NCUA Regulation §701.19 governs investments held to fund employee benefit plan obligations. Under this provision, a credit union may hold otherwise impermissible investments if the investment is “directly related” to the credit union’s obligations or potential obligations under an employee benefit plan.
Employees benefit obligations include:
- Defined benefit plan contributions
- 401(k) match contributions
- Employee life insurance expenses
- Employee health insurance expenses
- Deductible long-and short-term disability expenses
- Nonqualified plan expenses
Examiner Guidance:
- Clarification on direct relationship test
- Predictable investment returns over time horizon for benefit obligation
- Strong emphasis on board due diligence
- Pre-purchase and post-purchase
- Reasonable retirement benefits
- Based on size and financial condition of credit union, and duties of employees utilize surveys/peer data
- Concentration
- Not to exceed 15% of net worth with any one provider without sufficient mitigating factors
- 36-month transition period
- Expanded examination if greater than 25% of net worth in the aggregate
- Purpose is to ascertain any potential risk and assessing management’s understanding of the investments
- Examiner to assess whether credit union has a higher level of understanding and has done their due diligence
- Examiner will look for internal analyses and evaluation of all costs, including lost earning potential
- Not to exceed 15% of net worth with any one provider without sufficient mitigating factors
What are the Three Main Types of Investments?
(And how can they benefit your organization?)
Variable Investments
Variable investments encompass a broad spectrum of financial instruments whose returns are subject to change, influenced by factors like market dynamics, economic conditions, and management decisions. Variable investments include publicly traded assets like stocks, mutual funds, and ETFs, whose values fluctuate based on market conditions. In the private market, variable investments comprise alternative assets such as private equity and venture capital, offering potentially high returns but with greater risk and longer investment horizons.
- Flexibility
- Transparency
- Exposure to Other Asset Classes
Structured Products
Index Life(IUL)Structured products, including Indexed Universal Life (IUL) insurance policies, are financial instruments designed to provide investors with customized risk-return profiles. IUL policies offer a combination of life insurance coverage and a cash value component linked to the performance of a stock market index, such as the S&P 500. Policyholders can potentially benefit from market gains while being protected from market losses, making IULs attractive for those seeking both insurance protection and investment growth.
- Principal Protection (at Maturity)
- FDIC Insured (up to $250,000)
- Unrealized Gain/(Loss)
- Variety of Index Options
- 0% Floor and capped upside (IUL)
Fixed Investments
Fixed investments refer to financial assets with predetermined, stable returns over a specified period. These investments typically offer a fixed interest rate or dividend payment, providing investors with predictable income streams. Examples of fixed investments include bonds, certificates of deposit (CDs), savings accounts, institutionally priced Corporate Owned Life Insurance (COLI), fixed annuities, and funding agreements. They are often favored by conservative investors seeking steady income and capital preservation, although they may offer lower returns compared to variable investments.
- Death Benefit Liability Projection (Life)
- Contractual Guarantees
- High Credit Quality
- No Duration Risk
- Predictable Returns / Monthly Income
- Book Value Treatment
What is Credit Union-Owned Life Insurance? (CUOLI)
(And how can it benefit your credit union?)
CUOLI, or Credit Union Owned Life Insurance, is a life insurance policy that a credit union purchases on the lives of its key employees, typically executives and top management. The credit union pays the premiums and serves as the beneficiary of the policy.
Key Features of CUOLI:
Death Benefit: CUOLI provides a death benefit to the credit union in the event of an insured employee's passing. This benefit helps mitigate financial losses associated with the loss of key personnel.
Cash Value Accumulation: In addition to the death benefit, CUOLI policies accumulate cash value, which can be accessed by the credit union during the insured employee's lifetime to support strategic initiatives.
Applications of CUOLI:
Risk Management: CUOLI serves as a risk management tool, offering financial protection to the credit union against the loss of key employees. The death benefit can cover costs related to recruiting and training replacements, as well as offsetting potential revenue losses.
Employee Benefits: CUOLI can support the enhancement of employee benefits programs. Credit unions can use the cash value accumulated in CUOLI policies to fund employee retirement plans, supplemental executive retirement plans (SERPs), or other benefit programs.
Executive Compensation: CUOLI is often integrated into executive compensation strategies. Credit unions can leverage the cash value to fund executive bonuses, deferred compensation plans, or other incentives to attract and retain top talent.
Considerations for Implementing CUOLI:
Regulatory Compliance: Credit unions must ensure compliance with regulatory requirements, including disclosure and consent provisions for insured employees. Credit union boards should carefully review and approve CUOLI arrangements in alignment with regulatory standards.
Financial Analysis: Conducting a thorough financial analysis is essential before implementing CUOLI. Credit unions should evaluate costs, benefits, and potential risks to ensure the policy aligns with long-term strategic goals.
Expert Consultation: Due to the complexity of CUOLI, credit unions should seek advice from experienced insurance professionals, legal counsel, and tax advisors to design and implement effective CUOLI strategies.
The Value of CUOLI for Credit Unions
Credit Union Owned Life Insurance (CUOLI) is a strategic financial tool that helps credit unions enhance their financial position, manage risk, and strengthen employee retention and benefits programs. By understanding the fundamentals and strategic applications of CUOLI, credit unions can effectively leverage this tool to achieve their organizational objectives while supporting the long-term success of their employees and members.
What are Life Settlement Funds?
(And how can it benefit your organization?)
Life settlement funds represent an alternative asset class that seeks diversification and potentially higher returns outside of traditional asset classes like stocks and bonds. Here's a detailed look at the pros and cons of investing in life settlement funds:
Key Benefits:
- Diversification: Life settlement funds offer credit unions a way to diversify their investment portfolios beyond traditional asset classes like stocks and bonds. Adding alternative investments like life settlements can help spread risk and potentially enhance overall portfolio performance.
- Potential for Stable Returns: Life settlement investments can provide relatively stable returns over the long term, as they are typically not directly correlated with stock market fluctuations or interest rate changes. This stability can be beneficial for credit unions looking to generate consistent returns to support their operations and member services.
- Liability Matching: Investing in life settlement funds can help credit unions match the duration of their investments with the duration of their liabilities, such as employee benefits. Since life settlement investments typically have a long-term horizon, they may align well with the long-term nature of credit union liabilities.
- Non-Interest Rate Sensitive: Life settlement investments are generally not sensitive to changes in interest rates, making them less susceptible to the impact of monetary policy decisions by central banks. This can be advantageous for credit unions managing interest rate risk in their investment portfolios.
Considerations:
- Credit Risk: Credit risk is the risk that the counterparty to a financial instrument will fail to release an obligation. With life settlement funds, the insurance carrier represents the primary concentration of credit risk. To mitigate this risk, funds typically seek to purchase policies issued by highly rated life insurance companies.
- Liquidity Risk: Life settlement funds typically have a long investment horizon, as returns are either realized upon the death of the insured or have a stated maturity date. This lack of liquidity may be a concern for credit unions needing access to their funds in the short term to meet operational or member needs.
- Longevity Risk: There is a risk that the insured individuals may outlive their life expectancies, resulting in lower returns or losses on the investment.
- Complexity and Due Diligence: Investing in life settlement funds requires thorough due diligence to assess the underlying risks and potential returns. Credit unions must carefully evaluate the risks and benefits of investing in life settlement funds and may need to seek guidance from investment professionals or consultants.
Before investing in life settlement funds, credit unions should carefully weigh the pros and cons and consider factors such as their risk tolerance, investment objectives, and regulatory requirements. Consulting with legal and financial advisors who specialize in alternative investments can help credit unions make informed decisions about incorporating life settlement funds into their investment strategies.
What is an Institutionally Priced Annuity?
(And how can it benefit your organization?)
Institutionally priced annuities are a type of annuity contract that is typically available to institutional investors, such as pension funds, endowments, and large corporations. However, some insurance carriers also offer institutionally priced annuities to individual investors, providing access to institutional-level pricing and benefits.
Key Features:
- Competitive Pricing: Institutionally priced annuities often offer lower fees and expenses compared to retail annuities, thanks to the bulk purchasing power of institutional investors.
- Risk Management: Institutionally priced annuities can offer various risk management features, such as downside protection strategies, to help safeguard against market volatility and longevity risk.
Key Benefits:
- Diversification: By incorporating institutionally priced annuities into portfolios, investors can diversify their asset allocation and transfer the risk of loss to the insurance companies.
- Long-Term Growth Potential: Institutionally priced annuities may provide opportunities for long-term growth, and limit the effect of sequence of returns risk, thus allowing investors to benefit from market appreciation and compounding returns over time, without the risk of loss.
North American - Fixed Index Annuity
Integrity- Fixed Index Annuity
What are Public Investments?
(And how can they benefit your organization?)
Public investments refer to financial assets that are available for purchase by investors through public markets, such as stock exchanges or bond markets. These investments represent ownership or debt in publicly traded companies, governments, or other entities.
Types of Public Investments:
- Stocks (Equities): Stocks represent ownership in a company and offer potential for capital appreciation and dividend income.
- Bonds (Fixed-Income Securities): Bonds are debt securities issued by governments, municipalities, or corporations, providing fixed or variable interest payments over time.
- Mutual Funds: Mutual funds pool investors' money to invest in a diversified portfolio of stocks, bonds, or other securities, offering professional management and diversification.
- Exchange-Traded Funds (ETFs): ETFs are similar to mutual funds but trade on stock exchanges like individual stocks, providing liquidity and flexibility.
- Real Estate Investment Trusts (REITs): REITs invest in real estate properties and distribute rental income to investors, offering exposure to real estate markets.
- Commodities: Commodities include physical goods such as gold, oil, and agricultural products, offering diversification and hedging against inflation.
Key Benefits:
- Potential for Growth: Public investments offer the potential for long-term capital appreciation.
- Income Generation: Many public investments, such as dividend-paying stocks and bonds, provide regular income streams through dividends or interest payments.
- Diversification: Investing in a variety of public assets can help spread risk and reduce portfolio volatility, enhancing overall investment returns.
- Liquidity: Public investments are traded on public markets, providing liquidity and the ability to buy or sell assets quickly and easily.
- Professional Management: Mutual funds and ETFs offer professional management by experienced fund managers, providing investors with access to expert investment strategies and research.
Potential Risks:
- Market Risk: Public investments are subject to market fluctuations and volatility, which can affect their value and investment returns.
- Interest Rate Risk: Bonds and other fixed-income securities are sensitive to changes in interest rates, which can impact their market value.
- Credit Risk: Investing in bonds or debt securities carries the risk of issuer default or credit downgrade, leading to potential loss of principal.
- Liquidity Risk: Some public investments may have limited liquidity, making it difficult to buy or sell assets at favorable prices, especially during market downturns.
Inflation Risk: Inflation can erode the purchasing power of investment returns over time, reducing real investment gains.
What are Private Investments?
(And how can they benefit your organization?)
Private Investments encompass a diverse range of non-publicly traded assets that offer opportunities for capital appreciation, income generation, and portfolio diversification. Unlike public investments, which are traded on public markets, private investments involve direct investment in privately held companies, real estate projects, private debt, and other alternative assets.
Types of Private Investments:
- Private Equity: Private equity involves investing directly in privately held companies or acquiring ownership stakes in existing businesses, with the goal of achieving long-term capital appreciation.
- Venture Capital: Venture capital focuses on providing funding to early-stage or startup companies with high growth potential, often in technology, healthcare, or other innovative sectors.
- Private Debt/Credit: Private debt investments involve lending capital to companies or projects in exchange for fixed interest payments and the return of principal, offering steady income and downside protection.
- Real Estate: Private real estate investments encompass various opportunities, including direct property ownership, real estate funds, and real estate investment trusts (REITs), offering potential for rental income and property appreciation.
- Infrastructure: Infrastructure investments involve financing projects such as toll roads, airports, and utilities, providing long-term, stable income streams through contractual agreements.
- Hedge Funds: Hedge funds are private investment funds that employ a range of strategies, including long/short equity, event-driven, and macroeconomic, aiming to generate absolute returns for investors.
Benefits:
- Potential for Higher Returns: Private investments have the potential to deliver higher returns compared to traditional public market investments, thanks to their illiquidity premium and ability to capture value creation.
- Diversification: Private investments offer diversification benefits by providing exposure to non-correlated assets, which can help reduce portfolio volatility and enhance risk-adjusted returns.
- Access to Unique Opportunities: Private investments provide access to unique investment opportunities not available in public markets, such as early-stage startups, distressed debt, and private real estate projects.
- Alignment of Interests: Many private investments involve active management and direct involvement in underlying assets, fostering closer alignment of interests between investors and asset managers.
- Potential for Value Creation: Private investments often involve active management and value creation initiatives, allowing investors to play an active role in driving performance and enhancing returns.
Potential Risks:
- Liquidity Risk: Private investments are typically illiquid and may have limited opportunities for exit, which can make it challenging to sell or realize investments quickly.
- Lack of Transparency: Private investments may lack transparency and disclosure compared to publicly traded securities, making it difficult to assess risks and performance.
- Operational Risk: Private investments often involve direct ownership or involvement in underlying assets, exposing investors to operational and execution risks associated with the asset or project.
- Market and Economic Risk: Private investments are subject to market and economic risks, including changes in interest rates, economic downturns, and industry-specific factors that can impact performance.
What are Life Insurance Pools?
(And how can they benefit your organization?)
Life Insurance Pools refer to collaborative arrangements where multiple organizations or entities pool resources to purchase and manage life insurance policies collectively. These pools are often established to serve tax-exempt organizations, such as nonprofits, healthcare systems, or educational institutions, providing access to life insurance products with potentially lower costs and added financial benefits.
How Life Insurance Pools Work
- Pooling of Risk and Resources: Multiple organizations join together to create a pool, spreading the risk across a larger group and reducing the financial burden on individual participants.
- Investment Component: These pools often involve policies with cash value, such as whole or universal life insurance, which grow over time. The pooled funds are invested, and returns can be distributed back to the participating organizations.
- Death Benefits: The proceeds from the death benefits can provide financial support for the organizations’ operations or endowments.
- Customization: Pools can be tailored to align with the financial and strategic goals of the participating entities.
Key Benefits
- Cost Efficiency:
- By pooling resources, organizations benefit from economies of scale, reducing premium costs compared to purchasing individual policies.
- Administrative expenses are shared, further lowering overall costs.
- Enhanced Investment Opportunities:
- Policies with investment components allow tax-exempt organizations to build cash value over time, creating a potential revenue stream.
- The funds can be used to support the organization's mission, capital projects, or other long-term initiatives.
- Stable Source of Funding:
- Death benefits provide a predictable source of funds that can support endowments, scholarships, or ongoing operations.
- The payouts are generally tax-free, maximizing their impact.
- Risk Management:
- Pooling spreads risk across a wider base, ensuring stability even if some policies within the pool have higher-than-expected claims.
- Mission Alignment:
- Life insurance pools can be structured to reflect the organization's financial priorities, such as legacy giving, staff retention, or community support initiatives.
Potential Risks:
- Market Risk: Investment components may underperform, reducing expected returns or creating funding gaps.
- Underwriting Risk: Higher-than-expected mortality rates could increase costs or reduce benefits.
- Liquidity Challenges: Accessing cash value early can incur penalties or reduce death benefits, making funds less accessible for immediate needs.
- Administrative Complexity: Managing a pool requires compliance with legal, tax, and regulatory requirements, demanding specialized expertise.
- Limited Flexibility: Pools can be difficult to modify or exit without financial consequences, which may not suit evolving organizational needs.
- Concentration Risk: Over-reliance on the pool could expose organizations to significant risks if it underperforms.
- Tax and Legal Risks: Improper structuring could jeopardize tax-exempt status; compliance varies by jurisdiction.
Life insurance pools can be a powerful financial tool for tax-exempt organizations, offering cost savings, investment growth, and a stable funding source. However, they come with risks and administrative complexities that require careful planning and expert guidance. Organizations should conduct thorough evaluations and consult with advisors to ensure the arrangement supports their mission and long-term sustainability.
What is Corporate Owned Life Insurance (COLI)?
(And how can it benefit your organization?)
COLI, or Corporate Owned Life Insurance, is a life insurance policy that a company purchases on the lives of its key employees, typically executives and top management. The company pays the premiums and serves as the beneficiary of the policy.
Key Features:
- Death Benefit: COLI provides a death benefit to the company in the event of an insured employee's passing. This benefit can help mitigate financial losses associated with the loss of key personnel.
- Cash Value Accumulation: In addition to the death benefit, COLI policies accumulate cash value, and can be accessed by the company during the insured employee's lifetime.
Applications:
- Risk Management: COLI serves as a risk management tool, providing financial protection to the company against the loss of key employees. The death benefit can help cover costs associated with recruiting and training replacements, as well as potential revenue losses.
- Employee Benefits: COLI can be used to enhance employee benefits programs. Companies can use the cash value accumulated in COLI policies to fund employee retirement plans, supplemental executive retirement plans (SERPs), or other benefit programs.
- Executive Compensation: COLI can be integrated into executive compensation packages. Companies can use the cash value to fund executive bonuses, deferred compensation plans, or to finance buy-sell agreements for closely-held businesses.
Considerations for Implementing COLI:
- Legal and Regulatory Compliance: Companies must ensure compliance with legal and regulatory requirements when implementing COLI, including disclosure and consent requirements for insured employees.
- Financial Analysis: Before purchasing COLI, companies should conduct a thorough financial analysis to assess the costs, benefits, and risks associated with the policy.
- Consultation with Experts: Due to the complexity of COLI, companies should seek guidance from experienced insurance professionals, tax advisors, and legal counsel when implementing COLI strategies.
Corporate Owned Life Insurance (COLI) is a versatile financial tool that offers companies a range of benefits, including risk management, employee benefits enhancement, and executive compensation solutions. By understanding the fundamentals and strategic applications of COLI, businesses can leverage this powerful tool to strengthen their financial position and achieve their corporate objectives.
Expert recommendations for existing portfolios
(A complimentary service for qualified clientele)
Auditing an investment portfolio is a critical process for institutional investors to ensure alignment with financial objectives, risk tolerances, and regulatory requirements. This process involves assessing performance, risk metrics such as standard deviation and beta, asset allocation, and adherence to investment policy statements (IPS). Below is a structured approach to conducting a thorough investment portfolio audit.
1. Performance Analysis
The first step in auditing an investment portfolio is evaluating its performance relative to benchmarks and stated objectives.
- Absolute Performance: Measure total returns over different time frames (e.g., 1 year, 3 years, 5 years, and since inception).
- Relative Performance: Compare returns against appropriate market benchmarks and peer group indices.
- Risk-Adjusted Returns: Utilize ratios such as the Sharpe Ratio, Sortino Ratio, and Treynor Ratio to assess whether returns are justified by the risks taken.
2. Risk Assessment
A comprehensive risk assessment ensures that the portfolio aligns with the institution’s risk tolerance and objectives.
- Standard Deviation: Measures the portfolio’s volatility and overall dispersion of returns.
- Beta: Evaluates systematic risk by comparing the portfolio’s sensitivity to market movements.
- Value at Risk (VaR): Estimates potential portfolio losses over a given time horizon at a specific confidence level.
- Maximum Drawdown: Determines the largest peak-to-trough decline, essential for stress testing the portfolio’s resilience.
- Correlation Analysis: Assesses how individual assets move in relation to each other and to the broader market.
3. Asset Allocation and Diversification
Proper asset allocation is fundamental to portfolio stability and risk management.
- Strategic Asset Allocation: Verify that allocations adhere to the IPS, balancing equities, fixed income, real assets, and alternative investments.
- Tactical Adjustments: Assess any short-term shifts made by investment managers and their impact on portfolio performance.
- Diversification Metrics: Evaluate exposure across sectors, geographies, and asset classes to mitigate concentration risk.
4. Liquidity Analysis
Liquidity is crucial for institutional investors who may need to meet liabilities or adjust positions quickly.
- Liquidity Ratios: Calculate the proportion of assets that can be liquidated within a specified time frame.
- Lock-Up Periods: Review terms for private equity, hedge funds, and other alternative investments to ensure alignment with cash flow needs.
5. Compliance and Policy Adherence
Ensuring adherence to investment policy statements, regulatory guidelines, and fiduciary duties is critical.
- Investment Policy Statement (IPS) Compliance: Confirm that asset allocation, security selection, and investment strategies align with policy guidelines.
- Regulatory Compliance: Ensure adherence to SEC, FINRA, ERISA, and other applicable regulations.
- Ethical and ESG Considerations: Review integration of Environmental, Social, and Governance (ESG) factors if applicable.
6. Manager Performance Review
Assessing investment managers’ effectiveness in executing the portfolio strategy is essential.
- Alpha Generation: Measure active management’s ability to outperform benchmarks on a risk-adjusted basis.
- Consistency of Performance: Examine rolling returns to determine if performance is stable over different market conditions.
- Fee Efficiency: Review expense ratios, management fees, and trading costs to ensure cost-effectiveness.
7. Scenario and Stress Testing
Stress testing provides insights into how the portfolio might perform under adverse conditions.
- Historical Stress Tests: Apply past financial crises scenarios to assess impact.
- Hypothetical Scenarios: Model potential economic downturns, interest rate shocks, or geopolitical events.
- Monte Carlo Simulations: Use probabilistic models to simulate various future outcomes.
Regularly auditing an investment portfolio enables institutional investors to maintain financial stability, meet fiduciary responsibilities, and optimize risk-adjusted returns. By evaluating performance, risk metrics, asset allocation, liquidity, compliance, and manager effectiveness, institutions can ensure their portfolios remain aligned with their investment objectives and long-term strategic goals.
Complementing the Expertise of Your Current Advisors
(And unlocking new opportunities along the way)
For non-profits, maintaining and growing investment portfolios is essential to ensuring long-term sustainability and achieving mission-driven goals. We understand the importance of respecting existing relationships with investment brokers and advisors while offering innovative solutions that enhance portfolio performance. Our approach is designed to complement the expertise of current advisors, introduce new opportunities, and align investments with the organization’s financial objectives.
Our Collaborative Approach
1. Respecting Existing Relationships: We acknowledge the trusted relationships nonprofits have with their investment advisors. Our goal is to work collaboratively by adding value without disrupting these partnerships. We engage in transparent dialogue with advisors to ensure alignment and integration of our proprietary solutions within the existing investment strategy.
2. Understanding Organizational Objectives: Before proposing any enhancements, we take the time to understand the nonprofit's mission, risk tolerance, liquidity needs, and long-term financial objectives. By aligning our solutions with these priorities, we ensure that investment enhancements support both the financial and operational goals of the organization.
3. Introducing Proprietary Solutions: Our proprietary solutions are designed to complement traditional investment strategies. Whether through our proprietary investment solutions or alternative asset classes otherwise unavailable, we offer innovative options that can improve diversification, reduce risk exposure, and enhance returns.
4. Seamless Integration with Current Strategies: We work alongside existing advisors to ensure smooth integration of our solutions into the non-profit’s portfolio. This includes:
- Providing research and data-driven insights to support informed decision-making.
- Offering co-managed investment structures where applicable.
- Introducing new asset classes that align with the organization’s mission and financial needs.
5. Ongoing Support and Performance Monitoring: Our involvement does not end after the initial implementation. We offer continuous support through:
- Regular portfolio reviews and performance assessments.
- Collaborative strategy meetings with existing advisors.
- Adjustments based on market conditions and evolving organizational goals.
By working in partnership with a non-profit’s existing investment broker or advisor, we enhance portfolio performance while maintaining trusted relationships. Our solutions bring additional expertise, innovative opportunities, and mission-aligned strategies that contribute to long-term financial sustainability. Through a transparent and collaborative approach, we help non-profits achieve their investment goals without disrupting their established advisory partnerships.
What are the Advantages of Institutional Insurance?
(And why are they a smart alternative to fixed income and bonds)
Institutional insurance products, such as Credit Union-Owned Life Insurance (CUOLI), offer financial institutions a compelling alternative to traditional fixed-income and equity investments like bonds and stocks. These insurance solutions may not only provide competitive yields but also come with additional benefits that can enhance an institution's financial strategy.
Key Advantages of Institutional Insurance Over Traditional Fixed Income and Equity Investments:
- Enhanced Yields: CUOLI policies often provide higher returns compared to conventional fixed-income assets and less volatility than traditional equity exposure. For instance, while traditional bank investments such as CD’s and debt securities might offer modest returns, BOLI policies can produce excess returns in comparison, thereby enhancing non-interest income.
- Balance Sheet Strengthening: The cash value of these life insurance policies is considered a high-quality asset, contributing to the institution's financial stability. This can be particularly advantageous in managing liquidity and capital ratios.
- Risk Management: Under current accounting rules, volatility in investment asset values is now more problematic than ever. Some of the more specialized policies available today allow credit unions to mitigate volatility and still participate in the upside of equity markets.
- Protection for Institutions and Key Executives: In addition to serving as an investment vehicle, these policies also provide a death benefit that can be used to offset the financial impact of losing key executives, thereby serving as a form of key person insurance. Additionally, death benefits can be shared with insured executives, providing their families with additional peace-of-mind and/or a self-completing feature to their retirement plan.
- Regulatory Compliance: Regulatory bodies like the National Credit Union Administration (NCUA) permit credit unions to invest in CUOLI under specific guidelines, allowing for diversification into these higher-yielding assets while remaining compliant with investment regulations. In summary, institutional insurance products like CUOLI present financial institutions with a robust alternative to traditional fixed-income and equity investments. They offer the dual benefits of potentially higher returns and strategic advantages such as key person coverage and balance sheet enhancement.
Charitable Impact
Acumen empowers mission-driven organizations to amplify their community impact through highly-strategic charitable giving solutions. Our complimentary consultations include guidance on Charitable Donation Accounts (CDAs), impact funds, and grant assistance to align financial goals with social responsibility, ensuring you make a meaningful difference while remaining financially strong.
A Step-by-Step Process
(How Credit unions can do well by doing good.)
Credit Unions navigate the delicate balance of driving financial success while creating meaningful, positive change for their employees, members, and communities. At the heart of their people-helping-people mission lies a compelling question: "How do we do well while doing good?"
In a rapidly evolving financial landscape, Credit Unions face mounting pressure to adapt. Declining interest income and fee revenues demand constant re-evaluation of income strategies. Simultaneously, the competitive edge of big banks and fintech innovators challenges Credit Unions to meet and exceed the elevated expectations of today’s consumers.
We understand the critical tension between safeguarding the bottom line and championing transformative community impact. Too often, it feels like excelling in one area comes at the expense of the other.
But there is good news: this balance is achievable. Proven, innovative strategies now empower Credit Unions to not only remain competitive but to excel financially while amplifying their positive community influence. We’re eager to partner with you and demonstrate how.
Step 1 – Establish a Charitable Donation Account (CDA)
A Charitable Donation Account (CDA) allows your Credit Union to invest in a variety of expanded investment options that traditionally would be deemed impermissible by the NCUA. With these new investment options being made available to your Credit Union, you can conservatively expect to increase your Return on Investment from 4% to a 10% ROI. We partner with leading Investment Managers to maximize the financial return of your CDA investment.
Step 2 – Establish a Community Impact Fund (CIF)
What makes the Charitable Donation Account possible is the NCUA regulation that requires the Credit Union to donate 51% of the investment returns to a 501(c) Charity of your choice as a way to create Community Impact.
The remaining 49% of the proceeds can be used to fund other Credit Union initiatives at your discretion. In this scenario, the income generated for the Credit Union is nearly double, increasing from $200,000 to $245,000 which is the definition of “Doing Well”.
However, what makes this strategy so powerful, is that you were also able to generate $255,000 for a Community Impact Fund that will be used specifically to meet the needs of your employees, members and community, which is the definition of “Doing Good”.
Step 3 – Meet the Needs of YOUR Community
Using a Community Impact Fund (CIF), your Credit Union can further leverage the power of this strategy by directing the 51% of your investment return directly to the needs of your employees, members, and community in the form of an Impact Loan, which is a 0% Interest Loan that helps them save and get out of debt.
A Community Impact Fund solves the biggest problem in your community which is the number of households that are currently ALICE (Asset Limited, Income Constrained but Employed).
The Impact Loan helps employees, members, and your community who are ALICE, meet their needs such as food and clothing, housing, transportation, and medical expenses. In the process of paying back an interest-free loan, they are then incentivized to start building emergency savings at your Credit Union.
Together the CDA and CIF can create a sustainable and scalable form of Community Impact that helps both your bottom line and solves the community’s biggest problems.
Step 4 – Grow Your Income and Your Impact
The end result of this strategy is that your Credit Union has the opportunity to grow both your Income and your Impact. No longer do you have to choose between “Success or Significance.” Now you have the opportunity to have both! Our goal is to help Credit Unions leverage their unique characteristics to not only compete with the big banks in Fintechs but to thrive. Together our vision of “Prospering Communities Worldwide” can be a reality and we look forward to working with your team!
Step 5 - Empowering Communities, Fostering Growth
We believe in the power of community development and financial inclusion. The Financial Assistance (FA) Grant program is designed to support Community Development Financial Institutions (CDFIs) in their mission to provide access to affordable financial services and promote economic growth in underserved communities.
Unlocking Opportunities with Up to $1 Million
Through the FA Grant, eligible CDFIs can receive up to $1 million in funding to strengthen their operations and expand their impact. This grant is a game-changer, enabling CDFIs to tackle the challenges they face head-on and create lasting change.
Maximizing Impact with Flexible Funding
Our grant structure is designed to provide CDFIs with the flexibility they need to address their unique needs. Here's how the funding can be utilized:
- 85% Allocation
- Loan Loss Reserves: A portion of the grant can go towards building robust loan loss reserves, ensuring your institution's resilience and ability to weather economic fluctuations.
- Capital: Another portion of the grant can go towards strengthening your capital base, enabling you to expand your lending capacity and support more businesses and individuals in your community.
- 15% Allocation
- Unrestricted Funds: Enjoy the freedom to allocate 15% of the grant towards operational expenses, capacity-building initiatives, or any other areas that align with your strategic goals.
What is a Charitable Donation Account?
(And how can it benefit your credit union?)
A Charitable Donation Account (CDA) is a strategic financial tool that allows credit unions to generate additional income specifically for charitable giving. By investing funds in higher-yield assets, credit unions can significantly increase their charitable contributions while maintaining financial stability. A minimum of 51% of the investment returns must be donated to qualified charities, making it a sustainable and mission-driven approach to community support.
Key Features
- Investment-Based Giving – Credit unions invest a portion of their assets in approved vehicles to generate returns for charitable contributions.
- Regulatory Compliance – CDAs are governed by the National Credit Union Administration (NCUA), ensuring adherence to financial and charitable guidelines.
- Sustainable Philanthropy – By leveraging investment earnings rather than direct donations, credit unions can amplify their community impact without affecting core operations.
- Flexible Charitable Support – Funds can be directed toward 501(c)(3) organizations, including local nonprofits, education programs, financial literacy initiatives, and community development projects.
Key Benefits for Credit Unions
- Increased Charitable Impact – CDAs enable credit unions to potentially triple their giving budgets without additional financial strain.
- Enhanced Community Engagement – Supporting local charities strengthens relationships with members and reinforces the credit union’s commitment to its cooperative values.
- Financial Growth with Purpose – By investing in CDAs, credit unions turn idle funds into a force for good while maintaining financial health.
- Reputational Advantage – Demonstrating a commitment to social responsibility differentiates credit unions in a competitive financial landscape.
- Regulatory Flexibility – Unlike traditional donations, CDA-funded giving is supported by NCUA-approved investment strategies, making it a sustainable long-term solution.
Considerations
- Regulatory Compliance – CDAs must align with NCUA guidelines to ensure investments and donations meet federal requirements.
- Investment Strategy – Credit unions should carefully select investments that balance risk, return, and liquidity while supporting charitable goals.
- Governance & Oversight – Transparent management and reporting are essential to maintain accountability and align with the credit union’s mission and values.
By implementing a Charitable Donation Account, credit unions can maximize their community impact while reinforcing financial sustainability—ensuring that their commitment to "people helping people" grows stronger over time.
What is The Community Impact Fund?
(And how can it benefit your credit union and community?)
The Community Impact Fund (CIF) is an innovative financial tool that allows credit unions to directly support their members, employees, and communities by leveraging investment returns for mission-driven lending. By using a portion of returns from a Charitable Donation Account (CDA), credit unions can offer 0% interest Impact Loans to help financially vulnerable individuals—particularly those classified as ALICE (Asset Limited, Income Constrained, but Employed)—meet essential needs while building financial resilience.
Key Features
- 0% Interest Impact Loans – CIF funds are used to provide interest-free loans to help members cover critical expenses such as housing, transportation, medical bills, and basic necessities.
- ALICE-Focused Support – These loans specifically target households that earn too much to qualify for government assistance but struggle to afford daily living expenses.
- Incentivized Savings – As borrowers repay their interest-free loans, they are encouraged to start building emergency savings accounts at their credit union, fostering long-term financial stability.
- Sustainable & Scalable – When paired with a Charitable Donation Account (CDA), CIFs create a self-sustaining cycle of community reinvestment, ensuring ongoing financial impact.
Key Benefits for Credit Unions
- Addresses Local Financial Hardship – CIFs provide direct relief to ALICE households, supporting financial stability and strengthening the local economy.
- Member & Employee Engagement – Offering Impact Loans fosters stronger relationships with members and employees, reinforcing the credit union’s role as a trusted financial partner.
- Financial Wellness & Savings Growth – Borrowers transition from debt dependency to savings-building, improving their long-term financial security.
- Regulatory & Mission Alignment – CIFs align with credit unions’ cooperative principles and NCUA-approved charitable strategies, ensuring compliance while maximizing impact.
- Sustainable Social Impact – Unlike one-time charitable donations, CIFs create an ongoing cycle of support, continuously reinvesting in the community.
Considerations
- Investment Strategy – Credit unions must ensure CIF funding aligns with financial sustainability and long-term growth goals.
- Loan Program Management – Proper loan administration and borrower education are essential for maximizing impact and repayment success.
- Community Needs Assessment – Identifying the most pressing financial challenges for ALICE households ensures the fund is effectively targeted and impactful.
The Power of CIF & CDA Together
By combining a Charitable Donation Account (CDA) with a Community Impact Fund (CIF), credit unions create a holistic and scalable model for community support. This dual approach enables credit unions to increase charitable giving while directly addressing financial insecurity—all while reinforcing their core mission of "people helping people." A CIF isn’t just an investment in financial returns—it’s an investment in people, communities, and long-term economic stability.
Empowering Communities, Fostering Growth
(How the Financial Assistance [FA] Grant Supports CDFIs and Economic Development)
At Acumen Financial Advantage we believe in the power of financial inclusion and community-driven growth. The Financial Assistance (FA) Grant is designed to provide Community Development Financial Institutions (CDFIs) with the resources they need to expand access to affordable financial services, strengthen operations, and drive economic growth in underserved communities.
Unlocking Opportunities with Up to $1 Million
The FA Grant offers eligible CDFIs up to $1 million in funding to help them overcome financial barriers, enhance their lending capacity, and create lasting change. This grant serves as a catalyst for economic empowerment, enabling CDFIs to meet the evolving needs of their communities while ensuring long-term sustainability.
Maximizing Impact with Flexible Funding
The FA Grant is structured to provide CDFIs with financial flexibility, allowing them to allocate resources based on their specific challenges and strategic goals.
85% Allocation – Strengthening Financial Foundations
- Loan Loss Reserves – A portion of the grant can be used to build robust loan loss reserves, ensuring resilience against economic fluctuations and reinforcing financial stability.
- Capital Growth – Additional funds can be directed towards strengthening the capital base, expanding lending capacity, and empowering more businesses and individuals within the community.
15% Allocation – Operational Flexibility
- Unrestricted Funds – CDFIs have the flexibility to allocate 15% of the grant towards operational expenses, capacity-building initiatives, technology enhancements, staff development, or other strategic priorities that support long-term impact.
The Power of the FA Grant
By investing in CDFIs, the FA Grant empowers financial institutions to expand economic opportunities, reduce financial disparities, and create pathways to prosperity for underserved communities.This program isn’t just about funding—it’s about building stronger, more resilient financial institutions that drive sustainable economic growth where it’s needed most.
Sustaining Your Mission
(And how the Charitable Endowment Program can benefit your organization.)
An endowment is a vital necessity for mission-driven organizations to secure their financial sustainability and ensure the longevity of their impact. It provides financial security and a reliable source of income to support the organization’s mission. However, for many nonprofits, the challenge lies in finding innovative ways to grow their endowment.
The Need for Endowment Growth: Planting Seeds Today for Tomorrow’s Success
Many nonprofit leaders and board members find themselves asking, "How much easier would things be today if our predecessors had planted the seeds for endowment growth a decade ago?" Building an endowment requires foresight, as it ensures the financial stability needed to sustain a mission well into the future. Yet, traditional approaches often rely on “hopes and promises”—trusting that donors will leave planned gifts at their deaths. While well-intentioned, this approach lacks certainty and often falls short of delivering on the full potential of endowment growth.
A Better Way: Guaranteed Endowment Growth with Key Donor Insurance
One transformative way to grow an endowment is by using Key Donor Insurance, a forward-thinking solution inspired by practices in the for-profit world. Similar to how businesses insure their executives with Key Person Insurance, nonprofits can protect and sustain their most critical asset—their loyal donors.
Here’s how Key Donor Insurance works:
- The nonprofit identifies its key donors, those whose consistent annual contributions have a significant impact on the organization’s operations.
- A Benefactor of the nonprofit organization facilitates the purchase of Key Donor Insurance on these donors, with the nonprofit as the irrevocable beneficiary of these policies.
- Upon a donor’s passing, the insurance proceeds are directed into the endowment, ensuring their annual gift continues in perpetuity.
This approach addresses a critical challenge: when a key donor passes away, their ongoing contributions often cease, leaving a gap in funding. With Key Donor Insurance, nonprofits guarantee that these essential gifts not only continue but also contribute to the long-term growth of the endowment. This innovative solution resonates deeply with mission-driven organizations looking to secure their financial future.
Our unique approach:
At Acumen Financial Advantage, we’ve designed a transformative "Key Donor" insurance plan that can generate millions of additional income to your organization's endowment, foundation, or charity over the next 20-30 years. All at zero cost to the Endorsing Organization, their Charitable Entity, and the Donors in question.
Shifting from Hope to Certainty
Traditional endowment strategies rely on the hope that donors will honor their promises to leave gifts in their estate plans. However, Key Donor Insurance eliminates this uncertainty, allowing nonprofits to build their endowment with confidence. This strategy provides a guaranteed way to secure critical funding while ensuring that donor relationships are honored and their legacies preserved.
Why This Matters for Mission-Driven Organizations
By combining traditional endowment-building practices with tools like Key Donor Insurance, nonprofits can:
- Achieve Financial Stability: Generate a consistent source of income to fund programs, operations, and future initiatives.
- Sustain Donor Impact: Ensure that key donors’ annual gifts live on, even after their passing, reinforcing their commitment to the mission.
- Foster Strategic Growth: Create a foundation that enables the organization to adapt to new challenges and expand its reach over time.
- Engage Visionary Donors: Offer donors a way to leave a lasting legacy while supporting the organization in a meaningful and enduring way.
Reshaping the Future of Endowments
This dual-message approach—combining the proven value of traditional endowment growth with the guaranteed benefits of Key Donor Insurance—provides nonprofits with a holistic, forward-looking strategy. It shifts the narrative from “hopes and promises” to certainty and sustainability, ensuring that mission-driven organizations can continue their vital work for generations to come.
By planting the seeds for endowment growth today and embracing innovative solutions like Key Donor Insurance, nonprofits can transform their financial outlook and confidently fulfill their mission far into the future.
Restructure Your Split Dollar Plan To Align With Your Goals
Our Split Dollar plan enhancement offers tailored solutions to maximize your financial resources. Whether you're considering a buy-out or seeking to optimize your existing plan, we provide expert guidance to ensure your mission thrives.
Partnering with Organizations Nationwide
- Acadia Federal Credit Union
- Acero Charter Schools
- Adirondack Medical Center
- Alliant Health Group
- American Retirement Association
- Archer Cooperative Credit Union
- Berkshire Health System
- Bitterroot Health
- Brewer Federal Credit Union
- Bristol Health
- Brookings Health System
- CU Insurance Solutions
- Carthage College
- Clark County Credit Union
- Connex Credit Union
- Consumers Cooperative Federal Credit Union
- Cornerstone Community Credit Union
- Cornerstone Community Federal Credit Union
- Dirigo Federal Credit Union
- Dow Rummel Village
- Element Federal Credit Union
- Elements Financial Federal Credit Union
- Emergency Nurses Association
- Evergreen Credit Union
- Financial Resources Federal Credit Union
- First Care Health Center
- First Choice Federal Credit Union
- Five County Credit Union
- Food Forward
- Georgia United Credit Union
- Gulf Coast Federal Credit Union
- Hanscom Federal Credit Union
- Harris Health
- Healthcare Financial Federal Credit Union
- Highmark Credit Union
- Hometown Credit Union
- Idaho United Credit Union
- KV Federal Credit Union
- Kaiperm Federal Credit Union
- Life Credit Union
- Lincoln Maine Federal Credit Union
- Lincoln Public Schools Employees Federal Credit Union
- Lockton
- Lookout Credit Union
- Marshall Health Network
- Memorial Health System
- Metro Credit Union
- Metropolitan District Employees Credit Union
- MidFlorida Credit Union
- Midcoast Federal Credit Union
- MinnCo Credit Union
- NSP St. Paul Credit Union
- Naveo Credit Union
- New Orleans Fireman's Federal Credit Union
- Northwest Christian Credit Union
- Ocean Air (CBC FCU)
- One Vision Federal Credit Union
- P1 Federal Credit Union
- PIH Health
- Penn Highlands Healthcare
- Phelps Memorial Health Center
- Pine Bluff Cotton Belt Federal Credit Union
- Post Office Employees Federal Credit Union
- Postal Government Employees Federal Credit Union
- Rockland Federal Credit Union
- SCU Credit Union
- Salal Credit Union
- Seaport Federal Credit Union
- Sentinel Federal Credit Union
- Sierra Club Foundation
- Southern Chautauqua Federal Credit Union
- Spirit Financial Credit Union
- St. Jean's Credit Union
- Tennessee Hospital Association
- Tewksbury Federal Credit Union
- The County Federal Credit Union
- Tidal Health
- Tricorp Federal Credit Union
- Tucson Old Pueblo Credit Union
- Turning Point USA
- U of I Community Credit Union
- UARK Federal Credit Union
- Upward Credit Union
- Washington State Hospital Association
- Wellspan Evangelical Community Hospital
Select from the highlighted states below to read client testimonials for a sampling of their experiences with our team and click here to view our complete list of clients.
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Let’s talk.
Achieving outsized results requires a more intimate, white-glove approach to service, limiting the number of clients we take on at a single time.
Contact us for a brief discovery consultation so our advisory team can best prioritize your needs.
FAQs
Here are some common questions we receive about our services and solutions.
A SERP is a non-qualified supplemental retirement plan created to boost the retirement benefits of its participants. Unlike 401(k) and 457(b) plans, which are subject to strict contribution limits, SERPs (such as 457(f) or Split Dollar plans) offer flexibility with no restrictions on the amount that can be allocated to participants.
SERPs provide an effective way to reward your top employees and retain them with competitive, regulation-compliant compensation plans that offer unlimited potential for tax-deferred savings.
We focus on tailored strategies that align with your unique mission. Our approach combines industry expertise with innovative solutions to maximize impact. We believe in measurable results that drive your organization forward.
We proudly serve a variety of mission-driven organizations, including credit unions, healthcare providers, educational institutions, and nonprofits. Our expertise is designed to meet the specific needs of these sectors. We understand their challenges and are committed to delivering impactful solutions.
Our solutions include executive retention strategies, increasing yield on investments, and maximizing charitable impact. Each solution is customized to ensure it meets your organization's goals. We aim to enhance your operational efficiency and effectiveness.
Success is measured through the tangible outcomes we achieve for our clients. We set clear benchmarks and track progress meticulously. Our goal is to ensure that every initiative leads to significant, measurable impact.
Absolutely! We believe in creating bespoke solutions tailored to your specific needs. Our team collaborates closely with you to understand your objectives and challenges. This ensures that our strategies are perfectly aligned with your mission.