For those of us that have a long time to go before 65, we have the benefit of time on our side. I've calculated that at the current rates, the company's contribution to my cost basis will be about $40,000 (almost certain to go up during my career). If I were to dump about $30k in to the anemic guaranteed return investment (4% now, 1.5% minimum, I used 3%) and never add or remove another cent, I'd end almost even with the total cost basis at the end of my career, for $675 in fees. If the investment options end up being even slightly better, say, 5%, I would need significantly less to start with, about $13.5k.

That seems to me to be the best strategy if you want to take advantage of the investment profile. Put in as little as possible as early as possible so that you just barely hit the cost basis on retirement day.

The estate tax exemption for a single person is about $13 million this year. Hard to imagine more than a few outliers with estates that large passing away while still active here with the company provided insurance.

And if the $1.1 million was your only income, your estate saves $365k on federal income tax.

There are some states that levy an estate tax or inheritance tax below the federal threshold. DYODD, YMMV, talk to your estate planning attorney (or get one). The federal exemption is halved at the end of 2025 with the expiration of the 2017 TCJA.

I'm not sure why you are calling it 1.1 million of income. It's not income to the estate, it's an asset.

The GVUL investment earnings are subject to income taxes. This sets up a false comparison such as $40,000 cost basis times 35% income tax equals $14,000 tax savings. The real comparison should be $40,000 times 20% capital gains tax equals $8,000 tax savings. You see the alternative to investing in a GVUL policy is a taxable brokerage account that pays capital gains tax NOT income tax.

A better option would be a tax efficient ETF that doesn't charge an upfront 2.25% fee and offers better returns.

It seems that way.

I haven't had a chance to listen to the podcast yet (maybe it answers this) but on the mailer it says it is Permant*

In some program designs, if your plan sponsor replaces MetLife GVUL with another group life insurance plan or otherwise terminates the MetLife group policy, your coverage may also be terminated, even after retirement or separation from employment. Rates may increase if you leave your employer or are no longer eligible under the group and choose to continue your coverage.

OK, I'm not well versed so be kind, but if Delta decides in 5 years to dump MetLife then all the premiums paid (for the whole withdraw cash value equal to premiums paid) go poof? I assume since the GVUL is codified in the PWA they would switch to a different insurance company and continue the GVUL?

As far as the actual life insurance benefit am I correct in my understanding that functionally, the Term and GVUL are the same? I.e. you die, your spouse is paid $1,068,000? I think I'm confused by this fine print:

Earnings within your GVUL coverage grow income tax-free while the policy stays in force.

That only applies to any money you put into the investment side and not to the benefit?

I could type a long response, but go listen to the podcast. (1.5x speed if you’re pressed for time). Answers all your questions.

Ok, will do. Thanks.

Is this an Engage podcast??

DALPA->Podcast Dashboard->Episode 38
Yes.

(MetLife also hosting webinars, you have to register and download webex. It’s on their site, last i saw no streamable replays, but essentially the same info as DALPA podcast, 15% richer content and you can type questions to the MetLife guy. I registered minutes before the seminar began).

what’s the consensus? Cliff notes…

As has been stated many times in this thread, it is a no brainer to switch to the GVUL simply due to the tax savings for getting the exact same death benefit. Plus if you want to get into it the GVUL offers some portability options and investment options. But none of that extra stuff is mandatory.

I reread your post and now I’m not sure if this particular point was on the podcast or the MetLife webinar, but this is how I understand it:

Our PWA requires Delta to provide life insurance equal to 2500x highest pay rate, currently about $1.1M. This benefit is the same on the old plan or this new GVUL plan. Same cost to you: $0.

Benefit 1 of GVUL over old plan: the imputed income charged to you on GVUL is less than the old plan, and it varies by 5-year age segment. (Older pilots have higher imputed income because Delta pays higher premiums as you get closer to death. The older you are, regardless of seniority, the more this is a benefit). You still pay $0, but the value of what delta pays on your behalf increases with age. With GVUL, the plan overall has less imputed income to you, which in turn will save you money on taxes. Bottom line: if you die, the life insurance on both plans pay the same amount + GVUL will save you money on taxes.

Benefit 2 of GVUL: For some in the weeds reasons, GVUL has an option for the pilot to pay additional money to your individual policy for investment reasons. The policy is portable if you quit, retire, or get fired, BUT once you leave, you have to takeover paying for the premiums delta was paying if you want to continue having the $1.1M life insurance policy. If you quit paying or don’t want to pay those premiums, no problem, you can unwind the additional money you put in, PLUS any investment returns those monies made. The options you can turn that money into include cash, an annuity and maybe something else -> the podcast explains these options. Investment returns below your “cost basis” are tax free.

There are some drawbacks in fees to benefit 2 that makes me not want to participate in additional investing, despite the siren call of lower taxes. YMMV. (And you can change your mind in future open enrollments in how much you contribute, or if you want to change back to the old insurance plan. Podcast covers this.)

To your question, if Delta quits MetLife, your investment dollars don’t go poof, you would pull them out and pay taxes on your “cash value” (if any due at all). Or perhaps it would roll to another GVUL provider. I’m not sure technically how a change in provider would work for the whole group, but I’m confident your dollars aren’t vaporized.

On a related note, this plan has a prospectus. The fact this is something you have to call MetLife to order and read reeks of obfuscating the fees. Be careful (everyone), the fees on benefit 2 are confusing and it’s complicated.

Bottom line, Delta found another product that meets our life insurance requirements per the PWA. Since Delta saves money by paying less premiums we have less imputed income which means less tax. The investment side is just an added feature of the plan that generates additional income for the insurer at the individuals expense instead of Delta's. The investment side is a mine field of fees an cost variability which are designed to make money for the insurer.

FIFY

10char

Bold parts are not accurate.

This was brought to the negotiating table by the union, not Delta.

And the GVUL premiums, from what I’ve been told, are a wash or even slightly higher for Delta. The savings for individual pilots result from the different way that the IRS treats the premiums. The IRS uses a standard imputed income table for term plans, with the end result being the participant is charged imputed income on more than the premiums actually cost Delta.

GVUL plans are only charged imputed income on actual premiums, and are not subject to the notional imputed income table that drives high taxes on term plans.

The obsession by some to minimize what was fought for in this last contract is mind boggling.

Thanks, that is a very good explanation. Yeah, unless you really know what you're doing the investment side seems like a good way to feel like you're saving money on taxes while eating a bunch of fees. Maybe some could pull it off and come out on top but I'll stick with simpler and less opaque investing options.

It's cute that you think this is a huuuuuuge win. Win/win maybe, but it benefits the company more, they get the full cost savings while we get the tax savings and some terrible investment option. It's fine that it's been negotiated for us but the company is the bigger benefactor. Group rates are always lower. Add in the opportunity for the insurer to make more money and I bet the company negotiated some savings. I'll defer to the real numbers but sadly we will never see them. You may put the feather back in your cap, I won't contest this any longer since evidence proving either of us right or wrong is unavailable.

Umm, what? The company is paying the exact same amount in premiums if not a little more. How is that a win for them? The pilots, on the other hand, are going to save money. The union estimates $30 million in tax savings if every pilot switches to the GVUL. No pilot loses a single thing by switching to the GVUL. Yes, the investment OPTION probably sucks, but no one is forced to use that in any way, shape, or form.

how do you figure? Why would this plan be cheaper than the term life plan? It probably costs more.

with the term plan, we don’t pay imputed income on what delta pays, we pay based off some IRS table that is significantly higher than what DL pays.

A better approach?
 

Here's an insurance guy's take... I am a pilot and have been a licensed life agent for many years...
The fee loads, and myriad of charges on this are a non-starter for me... However, if all you're interested in addressing better tax treatment, you can elect the GVUL with the 50K group term and save a few bucks in imputed income. You are not required to fund this. With this agreement, the airline funds this. For me this saves roughly $3500 in taxes. YMMV... The "tax free growth" (and available loan feature I see as substandard. Why? Because it's not permanent life insurance in the real sense of the term. In my book, permanent life insurance remains in force for life as long as the premiums are paid. With WHOLE LIFE, the insurance company carries ALL the risk. Derivative products like this, transfer it to YOU. Why? WL insurance comes with 3 guarantees: Premium, cash value, and death benefit. A GVUL is a blended solution. On one side, you have a built in annual renewable term where mortality costs go up EVERY year. So... it continues to cost more every year. The offset is an side account(s) that is funded and (hopefully) performs better than the cost of the increasing term insurance it is paying for (or at a minimum moves at parity). In a boom market, the illustration looks awesome. In a down market ... not so much. I can't tell you how many 1035 exchanges I've done out of UL/IUL/VUL contracts to permanent insurance. When the investment side underperforms (while your still loaded up with fees to boot!), something has to give. Mr/Ms policy holder what would you like to do? Reduce your cash value? Reduce your death benefit? Or... increase your premium? There is no free lunch. All this said...To use the correct, permanent life insurance contract, properly built for many of the stated tax advantages is a phenomenal approach. If you're interested, look into Infinite Banking. There are certified IBC practitioners out there. I'd recommend finding one. Infinitebanking.org (Yes, I'm one, but am in no way soliciting. Call another practitioner). This works...

This is great info. Thanks for posting.

Front loading 2.25% on a 4% guaranteed return with withdrawal fees too should be criminal IMHO.

There is no option with 4% guaranteed return. Of the many optional investments, the lowest risk plan floats, currently paying 4% (lagging 3/6/12 mo tbills), but is only guaranteed for 1.5%.

Even worse, so the option isn't realistically an option. This put the MBCBP "poor choice" argument to shame.

I’m opting in because I see no downside to lowering my imputed income and adding some degree of portability. The investment doesn’t appeal to me, but isn’t necessary to use, anyway.

i consider just the imputed income change a huge win

The lowest risk option, “fixed account” is one of 21 optional plans*. It pays a minimum of 1.5%.

The highest I saw was “MetLife Stock Index Portfolio” with a 10yr annualized return of 10.88% and “BlackRock Capital Appreciation Portfolio” with a 10yr annualized return of 11.84%.

*I might also point out in that a separate document, there are only 7 investment options. I’m not sure which options we really have.

These are relatively easy to construct in Excel. Here is a simple model. There are also several online already built.

GVUL with no additional investment in the policy is my plan. I'll take the tax savings from lower imputed income and move on.

WRT Infinite Banking, I've modeled a few whole life policies from IBC mutual life companies against a 20yr term with the difference invested in an S&P ETF taxable brokerage margin account. Even with LTCG paid on qualified dividends from the ETF, the brokerage/margin option comes out ahead for total value. The one area where WL comes out ahead is higher available loan proceeds in the early years. This is because I put a cap on the margin loan to allow for a safety margin in a down market. There are pros and cons to each approach depending on the individual and I may revisit the IBC concept next year.

I still wouldn't pay 2.25% up front on those numbers. Knowing the withdrawal fee structure will likely change before I take money out. Paying for potential tax savings is too much of a gamble for me and the portability means the responsibility for premiums becomes mine. I'm not saying I won't participate in the insurance but defenately not the "investment."

Where did you find the investment options? All I've seen is the basic overview so far.

I found that video both entertaining and educational.

I had to call MetLife. :(

That’s pretty slick. Thanks for the find. I’m only familiar with Crystal Ball, but that was a student license many moons ago. Very impressed.

Response to Infinite Banking
 

IBC is a conversation that is germane to the discussion because it provides a stark contrast to the features GVUL touts. However, it also goes well beyond this. IBC is NOT an "investment" (although it shares some of those properties). If your focusing on ROR, you're missing the boat. IBC attacks, head on, the two biggest problems with money, which are taxes and inflation. Most give up north of 34% of their earnings in interest. It's not the interest rate that kills you. It's the volume of interest! It's all about how you cash flow money. The typical investor might put 10 or 20% in a qualified plan, then slug it out for a better ROR. The entire time they ignore the other 80 or 90% of their income! This is the beauty if IBC. It's about cash flow. We finance everything we buy. We either pay someone for the use of their money, or... we forfeit all future interest on our money when we pay cash... My intention was not wanting to take the thread "into the weeds", I'd encourage a read of Nelson Nash's "Becoming Your Own Banker". Again, I'm not soliciting here, but happy to clarify anyone's questions. I'm a pilot trying to share what I know. That's it. IBC changed my life.

I like the IBC concept. I agree the GVUL and IBC are miles apart. If someone is intrigued by the GVUL "investment" option they.should read Nelson Nash's book. I've done something similar with term insurance and a tax efficient margin account at IBKR. I don't pay income tax on the gains and the money stays invested when I access cash via margin loan. It provides a lower portion of available cash than high cash value WL, but the "cash value" earns a better long term return. When I die, the account gets passed on to my heirs at a stepped up basis, wiping out the LTCG tax liability.

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Just looking through the materials and I'm try to find an exemption for flying outside of delta or flying experimental aircraft. This is always a gotcha in life policies but I haven't found it yet. Anybody?

I haven't looked through the Met Life paperwork, but usually an Aviation exclusion comes in the form of a rider attached to the policy, basically saying that life insurance doesn't cover loss if the insured was a pilot/crew in an aircraft. This rider is actually very common in most life insurance policies.

In other words, I think if an aviation exclusion rider can't be found anywhere, the implication is that death by aviation is included in the policy (i.e. it's not excluded.) I'm also curious if anyone has found anything.

I thought contractually the only exclusion our life insurance policy could have was if you were killed by your beneficiary

This is correct. I can confirm that I asked MetLife specifically about GA and was told “everything is covered except for intentional death caused by beneficiary.”

Buy, borrow, die. And never pay taxes 😂 What kind of rate is IBKR giving you on margin loans right now?