Non-Qualified Retirement Plans create an obligation / liability by the employer to pay a benefit in the future.
Plan participants are interested in benefit security. The employer is interested in providing the benefits in the most cost effective manner. Individual insurance policies issued on some, or all, of the lives of the plan’s participants is often the most efficient economic solution to finance the liability.
The policies are owned by the employer (COLI) or a trust (TOLI) and provide “informal funding” for future liabilities. Product evaluation, selection and ongoing monitoring are critical in meeting the plan’s overall objectives.