John G. Budd
Head of Strategic Relationships, Worksite Benefits
MassMutual U.S.

The vast majority of employers now believe it is important to offer financial wellness programs to their employees (nine in ten in a recent study1), with group whole life insurance coverage emerging as an increasingly popular component.

True “financial wellness” is the capacity to absorb financial shock, be on track to meet goals and ultimately have financial freedom to enjoy life, according to MassMutual’s John Budd, Head of Strategic Relationships, Worksite Benefits.

Overall, insurance products are the second most popular offering2 to help address financial stability, says Budd, with an increasing interest in employers to include whole life products because they “play well to help support financial wellness for an employee’s entire lifetime.”

Worksite group whole life certificates are also appealing to employees because unlike individual retail products that can require medical questionnaires and exams. Group life insurance products are often offered on a “guaranteed issue” underwriting basis and some only require that a person be actively at work.

 

Lifetime certainty, dividend options

 

Assuming premiums are kept current, group whole life insurance provides certificate owners with a lifetime guarantee that the cost will never go up, the cash value will always increase at a steady rate, and the death benefit will never go down, notes Budd, adding that the protections are there even in old age or declining health.

He says that some group whole life products are participating and may pay dividends (which are not guaranteed) and can have a “powerful” impact on the certificate.

For example, a 50-year-old male non-smoker who purchased a $50,000 group whole life certificate from MassMutual in 2015 received a $197 dividend from MassMutual in 20203, although not guaranteed MassMutual has paid a dividend to eligible participating policy/certificate owners every year since 1869, including this past year, despite the pandemic.

As importantly, certificate owners have flexibility on how to receive the dividends. Budd says the most popular option is to use the dividends to purchase additional insurance by choosing the paid-up-additions option.

“This increases the cash value above the guaranteed level, as well as upping the death benefit above the initial face amount.”

 

Cash value and flexibility

 

Another appealing aspect is that the cash value of a whole life policy is guaranteed to increase every year.

Budd says the cash value grows tax deferred and distributions are typically income tax free, the cash value can be borrowed for any reason, such as to help in an emergency, help with college tuition, or to supplement retirement income. 4

And there are other ways a certificate owner may use the product. In most states, MassMutual’s whole life certificate owners can receive a one-time advance, or acceleration, of a portion of the death benefit if the insured becomes chronically ill.5 Generally, being chronically ill is defined as having a permanent loss of two activities of daily living (ADLs)—bathing, dressing, eating, transferring, toileting and continence. Additionally you could also qualify due to loss of functional capacity or requiring substantial supervision due to permanent severe cognitive impairment. The benefit is paid in a lump sum and may be used for any purpose. This benefit is not long-term care insurance or nursing-home insurance. In many cases this benefit allows access to more funds than would be available through a certificate loan. It’s available at no additional premium, however, there is a fee taken from the Chronic Care Benefit if it’s used.6

“Since the benefit is paid up front without any waiting period and there are no requirements for how they spend the money, it can be a vital benefit for families when they need it most.”

 

[1] MassMutual Financial Wellness Trend Study, February 2020. https://retire.massmutual.com/retire/email/business/rs48427.pdf?_ga=2.19652155.245472672.1593521234-1017920341.1593521234

[2] Ibid.

[3] Group whole life insurance: The power of the dividend, 2020. //retire.massmutual.com/retire/pdffolder/worksite/wi5091.pdf

[4] Access to cash values through borrowing or partial surrenders will reduce the certificate’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the certificate terminates before the death of the insured.

[5] The acceleration of the death benefit is intended to be tax advantaged under §101(g) of the Internal Revenue Code. The insured must be chronically ill, as defined in 26 USC 7702B. Certificate owners should seek tax advice from their tax advisor regarding an acceleration of their death benefit. Receipt of accelerated death benefits may be taxable.

Accelerating the payment of the certificate death benefit may affect eligibility for public assistance programs, including MEDICAID and SUPPLEMENTAL SECURITY INCOME (“SSI”). Contact the Medicaid Unit of the local Department of Public Welfare and the Social Security Administration Office for more information.

The payment of the Chronic Care Benefit will reduce the certificate’s death benefit, any cash value and any loan values. The certificate’s premium payments will then be based on the reduced amount of insurance and the rates in effect for the policy. There is no premium required for this benefit, however, there is a fee if the provision is exercised.

[6] The fee for the Chronic Care Benefit is a present value adjustment shown as a percentage of the Eligible Amount for the Chronic Care Benefit. The percentage depends on the Insured’s age at the time the benefit is exercised: 18% for ages 45 and above; 27% for ages 44-35; 36% for under age 35.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.

The accelerated death benefit disclosure provided at application should be read carefully. Restrictions and limitations will apply.

The products and/or certain features may not be available in all states. State variations may apply. Group Whole Life Insurance (GPWL), (policy/certificate forms MM-GPWL-2014 and MM-GCWL-2014, and MM-GPWL-2014 (NC) and MM-GCWL-2014 (NC) in North Carolina), is level-premium, participating permanent life insurance. The GPWL policy and GCWL certificates are issued by Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001.

CRN202301-277198