Articles

The American Rescue Plan, Tax Policy, and an Accelerated Economy

Mar 29, 2021

It's time to review your clients' non-qualified plan strategies. 


Newport anticipates significant changes in 2021 impacting compensation and retirement benefits for a company’s most valued employees – and change brings with it new opportunities. Personal and corporate tax rates may increase; the economy is predicted to continue to grow due to the $1.9 trillion American Rescue Plan; and recent legislation promoted a new generation of COLI products.
 
All of these changes present new opportunities for companies to revitalize their non-qualified programs to attract, reward and retain their best employees while reducing the income statement impact utilizing COLI.
 
Non-qualified retirement plans are an important element of compensation and benefits strategies to attract and retain key talent, particularly with the flexible working environment created by COVID.

These plans are designed to provide top talent with the ability to supplement retirement savings in a tax-efficient manner.

  • Pre-tax compensation deferrals provide a larger investment balance base and more rapid compounding of earnings compared to after-tax savings.
  • Tax-advantaged savings are essential in a year where the vaccine and $1.9T stimulus are likely to further fuel the economy and the stock market.
  • The ability to save on a tax-advantaged basis becomes even more advantageous if personal tax rates increase as expected.  
    • The Biden tax plan raises marginal income tax rates on taxable earnings above $400,000
    • The tax plan would also tax capital gains at ordinary rates for those earning more than $1 million
    • Some states, including California, New York and Illinois, have introduced or are considering introducing legislation to raise their income tax rates. Recent legislation signed into law (Consolidated Appropriations Act, 2021) created a new generation of more efficient COLI products that enhance a company’s ability to finance its non-qualified plan liabilities.
    • Corporate tax rates may also increase in the near future which further enhances COLI’s tax efficiency relative to other financing strategies

Now is the time to review your clients’ non-qualified plans and the financing of those plans. You may also have bank or insurance company clients whose BOLI or ICOLI portfolios need to be reviewed in light of the new, more efficient insurance products available.

Newport is here to help you, your clients and their key employees with any of these opportunities – which will also help you grow your practice. For further information, please contact your Newport NQ Regional Director:

David Baum, West Coast and Southeast at (469) 621-1032 or david.baum@newportgroup.com
 
Clay Kennedy, South Central at (469) 621-1005 or clay.kennedy@newportgroup.com
 
Nicole McKay, Midwest at (612) 384-6352 or nicole.mckay@newportgroup.com
 
Kerry St. George, Northeast at (469) 621-1031 or kerry.stgeorge@newportgroup.com
  
Newport strives to provide information that is accurate as of the date of publication. However, we cannot guarantee that the information contained herein is accurate as of the date it is received or that it will continue to be accurate in the future.
 
This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Consult your own tax, legal and accounting advisors before making any decisions. Newport and its affiliates do not provide tax, legal or accounting advice.
 
Newport Group, Inc. and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance and brokerage services. Securities are offered through Newport Group Securities, Inc., a dually-registered investment advisor and broker dealer, member FINRA and affiliate of Newport Group, Inc. Securities in California are offered through Newport Securities Insurance Services. For more information on Newport Group Securities, Inc. or Newport Securities Insurance Services and services offered, please visit our website at www.newportgroup.com.


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Newport Group, Inc. and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance and brokerage services.
Investment Advisory and fiduciary consulting services are offered through Newport Group Consulting, LLC, a registered investment adviser and wholly owned subsidiary of Newport Group, Inc.
Securities are offered through Newport Group Securities, Inc., a dually registered investment advisor and broker dealer, member FINRA and affiliate of Newport Group, Inc. Securities in California are offered under the Newport Securities Insurance Services. See BrokerCheck for more information. Other insurance products may be offered by Newport Group, Inc.
For more information about Newport Group Consulting and its services, please refer to our Form ADV Part 2A.
Newport Trust Company, is a New Hampshire state chartered trust company and wholly owned subsidiary of Newport Group, Inc. Newport Trust Company provides independent fiduciary and trustee services for employee benefit plans.