Alternatives to 401(k) Plans for Highly Compensated Employees (HCEs)

Almost all 401(k) plans discriminate heavily against HCEs and encounter qualification problems when the required anti-discrimination testing rules are applied. The typical solutions to solving these problems are both unfavorable and costly. Two interesting alternatives for HCEs are available for solving these problems more effectively, both involving the sale of life insurance: (1) Non-Qualified Deferred Compensation Plans (using COLI) and (2) A special proprietary "LBP 401(k) Plus" Plan (using individual non-variable policies).

In connection with Non-Qualified Deferred Compensation Plans, an effective approach that leads the client to choose COLI financing rather than having to be sold COLI is the consultative approach that presents the financial results of all approaches, from no financing (using current cash flow) to financing with mutual funds or other instruments; COLI then typically "sells itself".