[June 09, 2014]

Corporate Compensation Plans and MB Schoen & Associates Announce Disability Insurance Can Now Cover Retirement Plan Contributions

Due to a change in IRS regulations, insurance covering retirement plan contributions in the event of a participant's disability is now available, Corporate Compensation Plans, Inc. (CCP) and MB Schoen & Associates, Inc. (MBSA) announced today.

When employees become disabled, both employer and employee contributions to many retirement plans cease. To address this, CCP and MBSA developed 401(k)Secure®, a patented program that continues participants' contributions to their retirement plans during periods of disability.

Recent IRS rules governing treatment of ancillary benefits within certain retirement plans include a tax exemption for the premiums associated with providing this essential insurance. In the absence of this exemption, employees would be burdened with tax on premiums paid by the plan, and tax treatment of disability benefit payents paid to the plan could be called into question.

"By including the exemption in the final rules, the IRS appears to recognize the necessity of making disability protection available within defined contributions plans," explains Mark Davis, President of CCP. "This allows millions of Americans to receive this vital protection, especially those who rely solely upon their 401(k) for retirement security."

Employers can make this benefit available at little or no cost, paying for 401(k)Secure (premiums represent only a small fraction of annual plan contributions); sharing the cost with employees; or making it available on a 100% voluntary basis, with employees choosing whether to buy coverage.

For three decades there has been a steady migration from employer-sponsored defined benefit (DB) pensions to defined contribution (DC) retirement plans. DB plans largely protected employees against disability; in contrast, DC plans generally have not.

"Most employees are unaware that retirement benefits from defined contribution plans are at risk of diminishment in the event of disability," says Matt Schoen, co-inventor of the related patented processes.

Along with the loss of employer and employee contributions, employees also lose growth/interest that would have been earned on those contributions. This lost growth of assets can represent a multiple of the lost contributions themselves.

CCP, MBSA, and their jointly owned affiliate, CyArch, LLC, invested considerable resources to bring 401(k)Secure® and other solutions to market. They have secured three U.S. patents and helped obtain two IRS Private Letter Rulings.

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