If you ask an insurance company that offers these plans or an insurance agent that sells them, they will tell you that they are one of the last “tax-favorable” wealth building tools a business owner can use to grow their wealth.
If you ask me what a Section 79 Plan is, I’ll tell you that it’s one of the most over-sold and over-abused life insurance sales gimmicks in the insurance industry. Business owners can grow more wealth NOT using these plans (something you’ll never hear from an insurance agent pitching them).
Who is the ideal client for an insurance agent to pitch this plan to? A profitable small business who has an owner that would like an additional “tax-deductible” wealth building tool to use for retirement (so the market is large).
The sales pitch—Business owner, how you like to fund a plan that…
…allows your money to grows tax-free and where the money can be removed tax free in retirement (unlike a qualified plan where the money coming out is fully taxable)?
…is 30-40% deductible through your business?
…has limited expenses for employees?
Sound great right? Sure, if you don’t know the “real” math and pitfall to these plans.
That’s why I created this site. I wanted consumers and advisors alike learn in a “full-disclosure” manner the problems with Section 79 Plans.
After you learn about the problems with Section 79 Plans, I think, like me, you’ll come to the conclusion that the best course of action is to avoid these plans altogether.
Why You Should Stay Away From Section 79 Life Insurance Plans!
I created a more detailed two part series on why you should stay away from Section 79 plans.
To read Part I of my series on why you shouldn’t use Section 79 Plans, click here.
To read Part II of my series on why you shouldn’t use Section 79 Plans, click here.
While I strongly recommend you read my more detailed summaries, the following are the main bullet points explaining why you should stay away from these plans:
1) You have to lie to employees to implement them.
2) The life illustrations given by ignorant or crooked insurance agents are not realistic (most use today’s historically low lending rates with 2-3% loan spreads on variable loans on EIUL policies (ones that do not have a fixed lending rate)).
3) You have to be a C-Corporation to use them.
4) The life policies sold in these plans are so bad that the companies don’t want them sold unless they are in Section 79 plans (the policies are designed to have poor performance so the income tax deduction is increased).
6) And the best reason not to use a Section 79 plan is because when you run the real numbers the client would be better off NOT funding the plan, taking his/her money home after taxes, and funding a “good” EIUL policy (a Retirement Life™ policy).
If you are an insurance agent and are being told by an IMO or insurance company that you need to start selling Section 79 plans so you can get in the business market and make a bunch of money, resist the sales pitch. If you are a business owner being pitched a plan, resist the sales pitch.
If you’ve been told this is a can’t-miss program, have them give you what they think is a good illustration for a client and forward it to me at firstname.lastname@example.org. I’ll expose it for the nonsense that it is, and then you will understand first hand why you don’t want to sell these plans.