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Mandatory enrollment in GVUL

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  • Mandatory enrollment in GVUL

    My employer automatically enrolls staff in a GVUL plan. There is no opting out. However, it does offer a "buy-down" option. Essentially, I can do up to 100% buy down to decrease the cash value accumulation to 0 but increase the death benefit to ~2X ($1 million) what the original plan offers. In my mind, this basically makes it like a term plan, paid for by my employer. Normally, one of the drawbacks of owning a VUL is that the insurance costs eat up some of the return and will increase as I age, however the insurance costs in this situation are paid by the employer. The same drawbacks to cash value life insurance still exist, though: likely lower return than if I pick investments, illiquidity (loan from plan is at 8% interest), etc. I'm already maxing out 403b, 457b, 401a, backdoor roth, and aftertax roth conversion so the choice is between taxable account or more contributions to GVUL. The investment options in the GVUL are pretty good; plenty of Fidelity index funds with low ER. Student loans are paid off and only debt is mortgage. Savings rate is 40%. WCI did a post on VULs that gives a nice overview but I'm wondering if my prejudice against cash value insurance is causing me to overlook anything.

    1). Does having the insurance cost paid by my employer change the math at all on owning a GVUL?
    2). Would you do the buy down option? The opposite option exists as well, to increase the cash value contribution while decreasing the death benefit.

  • #2
    I have a similar plan. Any thoughts on this?


    • #3
      Employer paid GVUL definitely changes the math. The employer contribution.
      • As offered- no cost - some insurance, some cash value.
      • Buy down cash value, increase insurance.
      Do you need more insurance? What would the cost be of a term policy compared to the buy down. The employer subsidy could make this cheaper.
      •Buy down death benefit, increase cash value. You have tax free asset building building up subsidized by the employer. Is it worth the additional cost? Some of that cash value is paid for by the employer and you don’t need the insurance.

      The math changes because the employer is paying the upfront cost and the base premium.
      Different math, the question is the fees to tailor it to your needs. Probably not worth it for the privilege of cash value, but it is subsidized.

      Definitely checkout what happens if you leave. You would lose that subsidized annual employer contribution. Exit options are extremely important.