TA: GVUL
 

Source: Section 25.G.10.

I am not well-informed at all about Group Variable Universal Life Insurance.

All the Dave Ramsey/Clark Howard/Motley Fool advice I’ve ever heard is Whole Life Insurance is usually high commissions to the salesman and the return after fees on this product make it not worth it. The advice is buy term life insurance to insure your risk, and invest the difference in premiums in a taxable account and you’ll come out ahead over whole life.

And then this nugget in the TA comes out and I start doing some research. I read some opinions on Motley Fool and White Coat Investor and some other must-be-true Internet sources that are sour on VUL, but leave caveats that it might be good for a very small sliver of the population with high income, high tax rates, maxed out 401ks, paid off debt, etc.

Seeing how the company-paid life insurance policy has a steep imputed income slope approaching retirement; so much so that pilots are voluntarily foregoing the policy to not get hammered on imputed income, and this theoretical GVUL plan would be an alternative, would anyone be able to explain or offer an opinion of would this be something worth our while? And if so and age/income thresholds?

Whats the main benefit? Why would someone choose this option over others? Anyone got a friend or family member with experience on this?

We don’t have any details on our plan particulars, but thought I’d put this out to the ether to discuss.

I think at some point the question becomes why do you need any life insurance at all? That's basically Dave Ramsey's take - that you get term long enough to cover your early to middle years with kids/house/college/etc, then over time as you build wealth a surviving spouse will have enough money in savings and investments to live comfortably even with the loss of the income of the deceased spouse. The purpose of life insurance is to replace lost income, that's why most financial planners say to have 10-12 times your income in life insurance, so that when you die that lump sum invested will generate close to the lost income so the surviving family isn't left destitute. I would hope that most pilots approaching their mid 50's, and certainly 60 and up, are multi-millionaires to the point where even if they die their spouse will have plenty of money to live for decades. Of course anyone is free to purchase (or use the company provided insurance) in order to boost that amount, but that's more just a financial luxury as opposed to a necessity.

I still think that in the long term, just investing more money will yield better returns than trying to play some VUL shell game with the high fees and commissions. Obviously someone at that point is maxing out every tax-advantaged retirement vehicle, but even basic taxable brokerage accounts would still be a better deal in my mind.

The best part of whole life is being able to add to it above and beyond the base premiums to increase cash value. Those funds are added after tax, grow tax free and can be withdrawn tax free. Lots of people is the cash value of their whole life policy to act as a buffer for years when the market is down and their other IRAs, 401(k)s etc are under performing. You can take the minimum from those accounts and supplement with the cash value acct to stretch your IRAs further. Another option is to convert you cash value at retirement into an annuity. The plan that this contract is supposed to deliver will be client directed, so you can invest the money anywhere you want and can use what ever risk index you’re comfortable with. There’s really a lot of options with a whole/universal life policy. Dave Ramsey is for people that live under mountains of debt and don’t know how to use debt for their own benefit. You’ll never hear him giving financial advice to people with six figure incomes and seven figure (or higher) retirement accounts.

Exactly wrt Ramsey. I was having a conversation with one of his followers who couldn’t believe a retiring captain had financed his home. This is when you could get mortgage a little over 2%. He was of the mindset that all debt was bad and that if you were doing anything different, you were leveraging. My point was it was almost free use of the money at 2% and even taking the most conservative path, you can probably make more in a CD. Well, I was wrong. You can have that money in a savings account at the moment and make better than a point differential. Rates go back down? You can always pay off the mortgage.

Don’t get me wrong, Dave has a lot to offer, but his simple advice starts losing traction as it goes up the income hill.

The question is purpose. Are you buying life insurance as an income replacement or as an investment to pass on as inheritance. My perspective has always been income replacement. Investing is best done through other vehicles but the easy road for a legacy is whole life insurance.

The other big caveat is most insurance advice is for when you are the one paying the premiums. In this case if the company is fronting the money the equation of what product is best changes. I think we will have to see what MetLife/ALPA/DAL come up with and re-evaluate then.

this. And the fact that right row the only benefit the term plan provides is nothing upon retirement or a spouse that gets a pile of cash upon exercising the pushing up daisies option. So if at the time I choose to stop working and get money to do something with, it is still better to have a choice the company funded, even if it’s not “the best financial product” offered.

I have a whole life.

Not planing to use it for my death, if not for my living expenses past 65yr. You can either use the cash value, dividends or both for extra money/supplement your 401k.

As of now, I’m planing just to use the dividends for extra income.

I am not very smart about this stuff (and don’t want to be), but I converted a small amount of a term policy to a VUL at the suggestion of my financial advisor. I am sure he is getting commissions, but it was explained to me that I need more tax free income in retirement. So basically what Myfingershurt said.
At any rate, I did that. As I understand it, one takes out a loan against the cash value and basically never pays it back, or pays it back slowly near the end of one’s life. I could be way off base here. I trust my advisor and prefer to think about my family and goofing off more than I do high level financial planning. This GVUL is something I will mention to him at our upcoming review, though.

By the way, I agree about Dave Ramsey. But at least he means well. Robert Kiyosaki has hoodwinked several people I know and has been less-than-positive influence. I do understand that much about finances!

This topic is dancing around the edges of Nelson Nash’s Infinite Banking concept. I’ll be curious if the GVUL policy is a close enough substitute for a participating whole life policy as called for in the concept. Delta paid premiums could offset some of the fees that generally get in the way.

The GVUL we have at United is pretty sweet.

The cost of insurance is definitely more due to it being annual renewable term. It’s priced based on your age and how much coverage you selected. As I get older I reduce the amount of insurance to keep costs in line.


I use the investment portion of the product. Several funds to choose from. I’m in the total stock market index. Relatively low ER. Every dollar you invest goes into the investment portion - no load.

Any money you withdrawal below your cost basis is tax free. Cost of insurance counts towards your basis, as well as your investments you make.

Example: I have $30,000 cash value. But because I’ve had to policy for awhile, and contributed to it, my cost basis is $40,000 (contributions plus insurance costs). I can withdrawal my whole $30,000 tax free, even if it’s up 100%.

I manage my account and always withdrawal once my costs basis and cash value get close - then do it all over again.

Whole life/variable life is a great product - it’s the main street costs that make it terrible. We don’t have those prohibitive fees for our UAL program and I’m sure you won’t either.

I wanted to bring this thread back form the dead. We have the rates and rules now, so what are your thoughts?

I'm generally pretty up to speed on financial matters, but I've never spent the time to understand all the benefits and costs of various kinds of life insurance. From what I can see, I don't see any reason not to choose the GVUL. If you use it for nothing more than the standard life insurance scheme, it comes with (for now) lower imputed income. Then there are the extras, like cash value withdrawals and the option to take it with you when you retire. What else is there as far as benefits? Are there any negatives to this that I'm not seeing?

What is the death benefit amount of your policy?

When does ours start? I’m about 2 yrs to finish with my Whole life PUS and the GVUL might be the next one I’ll work with.

The biggest advantage to whole life policies or annuities are the absolutely phenomenal amounts of money they make for the selling agent and the company. Costs that you can’t even see are baked in everywhere and you need a attorney who specializes in these policies to even read the contract.
As mentioned by others if you are near retirement age you should be fully self insured as a Delta pilot. In addition if you have a PBGC benefit you have not started drawing you have an excellent free insurance product.
The company provided insurance is also not that expensive. Strangely some pilots think the imputed income number is the actual amount you pay in taxes.

I'm assuming you mean with Delta and ALPA-provided insurance?

self insured in that you have enough savings available to pay for your own funeral, etc.

Your estate plus social security should provide a very nice quality of life for your heirs. You should not need any insurance. If you are over 50 add up your 401k, outside investments, house or houses, PBGC, social security ect.. Then decide just how rich you want your wife’s next husband to be!
The one thing I would advise spending money on is excellent estate planning. Time after time you will see someone build wealth and pass away. Strangely their now rich spouse meets someone else often younger and remarries. They love and thrust their new partner and have him promise to give most of the estate to your kids who should receive it. In the end your estate goes to the new spouse and passes on to his or her kids. The generational wealth you built for your family is gone!

Gotcha and ouch.

Yeah yeah…make your own research. Stop spewing Dave Ramsey Bs.

Anyone that is young enough should use it as an alternative to 401k, Social Security, etc. Mine is paying 4% guarantee growth + dividends (this year 5.75%). And I can read my contract just fine, it’s all spelled black and white, not like our PWA.

Anyone with PBGC, is already late to the game for the WLI. Anyone that’s in their 20s-low 30s, compounding alone can be very lucrative at retirement. I could probably just use dividends at retirement for extra income.

You got 5.75% this year. Now account for where the costs were pulled out and what your real yield is. When you look at what they now claim the policy is worth is that the actual cash value, some form of death value or other nebulous value that can’t be accessed? How many pages is your contract? When did you purchase this policy and if you cashed out today what will you get verses what you have invested? What is the surrender charge to get your money back? I Stupidly bought an annuity from one of the highest rated companies around and offered a 7% guarantee. Never in reality saw anything close to that.

GVUL will minimize taxes on imputed income levied on term life insurance.

That sounds like spending a dollar to save a dime.

Having heard multiple pitches for various high cash value policies the conclusion I keep reaching is buying term and investing the difference in a tax efficient ETF works better. I haven't looked at the Delta GVUL numbers specifically, but I doubt they tell a different story. The general premise behind the policies it to bundle insurance and an investment in such a complicated manner that the buyer rarely understands exactly what is going on. The insurance company gets a lifetime of deposits with only one redemption option that doesn't involve hefty fees and surrender charges.

On the flip side. Life insurance companies are a great source of long term financing for investment property. Just to be clear I'm talking about a life company real estate loan, not a cash value policy loan.They are cash rich with a low cost of capital (ie low returns to policyholders) and expect to hold the capital for decades before returning it.
​​​​​​

You’re not wrong, but you’re missing the point. The company is paying the premium(not you), it offers a current year tax advantage over the company provided term policy(because of how the IRS calculates imputed income), it offers another tax advantaged savings mechanism (if you want to use it).

Not really a down side.

I thought this was a potential REPLACEMENT for the company provided Term Life insurance. The one the company pays all the premiums for an we just get the imputed income. By my understanding, the Company would pay all the premiums for this product, our imputed income is lower, and we get the investment opportunities for it. Makes the whole argument for buying term vs whole life go out the window. Am I wrong in my understanding of how it is going to work?

I generally agree though, if you are paying the premiums term vs whole is the conventional wisdom winner.

Hopefully we can get some more info from the Company and Union on this new product. A podcast on it, plus the other changes like the new dental options, would be great before open enrollment.

But we’re not talking about investing your own money. This is a company paid policy. (At least that’s my understanding.) So the question becomes is it better to have the likely higher value term policy (that pays nothing if you make it to retirement). Or a vehicle that leaves you with some value after you stop working for Delta. I’ll wait for more details and pass it to my financial advisor but it seems to be a viable option (especially for those that don’t really need the life insurance anyways).

No, I got 8.75….

4% guaranteed + 5.75% dividends.

If I cash out today, I’ll be around 7k more per year that what I’ve put on.

Also look at how much Mutual life insurance companies have paid in the last 34yrs.

I think both of you guys are missing the point of the question. This isn't about whether whole/universal is better than term in general, or on the open market. The question is about our new choice in company paid insurance, negotiated under C19 (PWA 25.G.10 if you need the reference). We get to choose between regular term life, or GVUL, and the death benefit is the same (at least originally). Why, or why not, would you choose one over the other?

This is what I want to know as it seems too good to be true. I get the same coverage amount but now I can get an associated cash accrual as well? Shirley, I'm missing something.

Exactly. Not a fan of indexed annuities or most of the non term life insurance schemes… but a premium paid by the company potentially makes it a different animal. Hard to make a real judgment until we get all the details.

I’ll freely admit I didn’t even know this was in the new contract. Can someone explain the options to me like I’m 5?

If you have (& intend to keep) the company-paid policy in any amount over the minimum ($50K?) to the maximum ($1.3M?), it's a complete no-brainer: switch to the GVUL. You have the same coverage for the same direct cost ($0) to you--but your imputed income (and therefore your total taxable income) will be less.

The more complicated bits are where information has been sorely lacking. In essence, it's a whole life policy funded by pre-tax money. Where it gets interesting--and where I'm not nearly smart enough to figure optimum strategy--is that your basis includes ALL premiums paid, to include those paid on your behalf (i.e., by the company). Any additional money you put in, only the gains are taxable--and those gains are offset by that total premium. This is the part where I want someone WAY smarter than me to analyze....

I didn't realize so many people didn't get/see the email. I don't mean that as a swipe, it just means some of the responses make more sense now, lol

https://www.metlife.com/gvul/DeltaAirLines/

What info on that page answers any of our questions?

You are correct, I was not specifically addressing the PWA GVUL option. Thanks for getting us back on track.

After reviewing the data from the links in the 9/27 Flt Ops email. It appears the GVUL policy provides the same death benefit amount with lower imputed income. On that basis it looks like a better option than the group term option. The jury is still out on the investment portion.

Q1. Is the current company paid life insurance death payout taxable or tax-free income?
Q2. Is GVUL death payout taxable or tax-free income?

Could make a difference…

If you pay taxes on the imputed income, then the payout is tax free.

Edit: This website also clearly states that both the current and GVUL payouts are tax free. It also says that the GVUL cash value payout is tax free as well.

https://www.metlife.com/gvul/DeltaAi...parison-chart/

No problem. I have not seen the email. Was it in the company inbox?

It was an Alpa email, if I remember correctly.

Didn't see an ALPA email. but it was in the Company's Weekly Propaganda Update sent on Sep 27.