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Bryan Beatty in Life Health Pro Magazine Article: Rethinking Executive Comp Plans When Cash Is Tight

Bryan Beatty Is Featured in Life Health Pro Magazine Article, "Rethinking Executive Comp Plans When Cash Is Tight"

April 6, 2009, Life Health Pro magazine — In his article, “Rethinking Executive Comp Plans When Cash Is Tight,” reporter Warren S. Hersch explained:

“As the U.S. economy sinks deeper into recession, cash-strapped small business are confronting tough decisions about the life insurance-funded, non-qualified executive compensation packages they’ve established to reward and retain their top talent. To ease the financial strain on their balance sheets, sources tell National Underwriter, firms may need to explore a range of options, from restructuring the plans to a suspension of funding. For many, the one option that isn’t available is to do nothing.”

He interviewed financial planner Bryan Beatty on the topic:

For some financially stretched businesses, the only realistic option is to suspend the plan—or terminate it altogether. Bryan Beatty, a certified financial planner and principal at Eagan Berger & Weiner LLC, Vienna, Va., says companies will often cut the flow of funds to retirement plans to meet basic operating expenses—payroll, the office lease, replenishment of inventory and the upkeep of equipment—and to maintain investments needed to remain competitive.

But non-qualified arrangements won’t necessarily be the first to go. Some firms, says Beatty, may opt first to suspend qualified plans, such as a 401(k) or (for non-profits) 403(b) plan. The reason: These arrangements are potentially more costly to the business because they must be extended to all employees. Non-qualified plans, though generally more expensive on a per-employee basis, can be restricted to a select group of executives.

“Many VUL-funded programs will be in trouble because of declining asset values resulting from huge negative returns in the equities markets,” says Beatty. “If you have to invade the policy to pay the premium, then that further destroys its value.”

Click here to read the full article.