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Business Pentafecta®


The Business Pentafecta® provides the business, non-profit, or credit union up to five ways to retain and benefit key people, while helping the employer too.

  1. Key Person life insurance payable to the Business
  2. Income for the family of the Employee if he/she dies
  3. Key Person payments to the Business if the Employee suffers a long-term disability
  4. Income to the Employee if he/she suffers a long-term disability
  5. Retirement income to the Employee


The Employee remains eligible to receive benefits only if he/she continues to be employed by the Business until the triggering event for a specific benefit (death, disability, or retirement). Thus, the Business benefits from a strong incentive on the part of the Employee to remain with the Business. Business Pentafecta

If the Employee stays until retirement, the Business has the alternative of bonusing the policy to retiring Employee. Such action may have the effect of making former Employee retirement distributions and/or death proceeds income-tax free. Also, the retired Employee would no longer rely on his/her former Employer to pay out future benefits. The Employer gets a tax deduction at the time of the transfer. The retiring Employee may choose to take a policy loan as reimbursement for any income tax liability created due to the transfer.

In the case of tax exempt organizations, such as charities or credit unions, tax deduction to the Employer does not apply, and the retiring Employee is subject to tax on the present value of the entire stream of income to be received. If the policy is rolled out to the retiring Employee, the bonus to to retiring Employee, possibly funded via a policy loan, may  need to reflect this. (Deductibility of payments to the executive do not apply in the case of tax exempt organizations.)

Amazingly, the entire plan might be funded by seeding minimum working capital, and subsequently using leverage to recapture its use in times of need by the Business. Periodic calculations must be done to see if the plan is adequately funded. The same procedure would apply to check and see if the underlying policies aren't excessively leveraged. Most employers rely on both the organizations marketing the plan, and a third party actuarial firm to monitor the plan over time. Doing so will also go a long way toward making the executive who stands to benefit from the plan to believe that benefits will actually be paid some day.

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