New York Life has placed substantial whole life insurance in credit unions to recover the cost of benefit programs pursuant to NCUA rule 12 CFR 701.19(c). Most states have allowed similar activity for state chartered credit unions under parity or other provisions of the state credit union act, or the rules and regulations or practice of the state regulatory body. 

 

The Estate Planning Institute has designed these New York Life policies to maximize yield, reduce volatility, and take advantage of the guarantees inherent in the whole life product. We utilize a small face amount ($100,000) and over-fund the policy with a premium in excess of $1,000,000. This design creates an efficient use of cash value. The cash value gain year by year has two components;1) a guaranteed cash value increase each year and 2) a non-guaranteed dividend each year beginning year 2 that becomes guaranteed once paid. A “dividend scale” is used in illustrating future values decades into the future, and it takes a board of directors’ vote to change that scale. In our typical design for credit unions, approximately 50% of future cash value gain is guaranteed, with the other 50% being dividends.

 

While future dividends are not guaranteed, New York Life has always paid a dividend throughout their 164 year history. Once a dividend is paid it becomes guaranteed, and therefore the entire account balance (cash value) is guaranteed at all times. Dividends are affected by mortality, expense and investment experience in that these things ultimately have an impact on surplus and profit. Annual profits are paid out as dividends or retained as surplus. As of the end of 2008, New York Life had a current surplus and AVR in excess of $12 Billion³. Dividends are not directly tied to an underlying separate investment account or portfolio. Of the permanent cash value products that New York Life sells, only whole life policies represent membership/ownership and receive dividends.

 

Participating Whole Life with a major mutual life insurance company is widely viewed by industry professionals, rating agencies, and the insurance buying public as the least volatile form of permanent cash value insurance. The stability and predictability of the product, the strong guarantees, the financial strength of the New York Life, and the cultural fit with the largest mutual insurance company owned by its policy holders in the U.S. have made this an ideal foundation upon which credit unions can responsibly fund long term employee benefit liabilities.  

 

¹ Michael P. Daly, Agent New York Life Insurance Company. Financial adviser offering investment advisory services through Eagle Strategies LLC, A Registered Investment Adviser. Estate Planning Institute is not owned or operated by New York Life Insurance Company or its affiliates. This is not a formal educational institution of learning.