How Banks Use BOLI to Offset Benefit Costs

Employee benefits are a significant expense for banks, and many institutions use Bank-Owned Life Insurance (BOLI) to help manage these long-term costs.

BOLI is a life insurance policy that a bank purchases on selected employees, typically key executives. The bank owns the policy, pays the premiums, and receives the benefits. Over time, the policy's cash value grows on a tax-advantaged basis, creating a source of non-interest income.

Banks often use the earnings from BOLI to help offset the cost of employee benefits, including retirement plans, deferred compensation, and executive benefit programs. This allows institutions to support competitive benefits while reducing the impact on operating income.

In addition to helping fund benefit obligations, BOLI can strengthen a bank's balance sheet by providing a stable, long-term asset. Because it is subject to regulatory guidance, banks must perform careful due diligence and ongoing oversight when implementing a BOLI program.

For many financial institutions, BOLI is an effective strategy for managing benefit costs, improving tax efficiency, and supporting long-term financial goals. 

With over 100 years combined experience in the industry and relationships with all the marketplace BOLI carriers, BCC can assist your bank in not only selecting the BOLI product that best suits your needs, but can also offer a complete in-house, accessible, and committed service team to assist with implementation, compliance, and administration of your BOLI and benefit plans.