C—Salary Allotment

The compensation provided to most employees consists of both salary and benefits. Benefits can often equal 30 percent or more of direct payroll costs. With a salary allotment plan, it is possible to contain these expenses, while at the same time offering a valuable benefit with no direct cost to the employer.

A salary allotment plan can also be very attractive to employees. By purchasing a base of permanent life insurance during his working years, an employee can avoid the prohibitive costs often associated with converting group life insurance upon retirement. This then guarantees that some life insurance will always be available, whether death occurs before or after retirement.

Under the typical salary allotment plan, employees are given the opportunity to supplement their existing group and other coverages with life insurance, disability income insurance, long-term care insurance, or annuity benefits. This is a purely voluntary program, which each employee can take advantage of through an individual pay allotment to the insurance company.

The advantages of such plans often include:

• Discounted premiums from group billing efficiencies.


• No physical examinations.


• Level premiums that do not increase.


• No lapse of policy upon retirement.


• Convenient payroll deduction of premiums.

To make these benefits available, the insurance carrier will usually require the employer to:

• Provide notice of enrollment opportunity.


• Allow for enrollment at work during business hours.


• Arrange for payroll deductions.

Most employers have found that their employees are grateful for the opportunity to enroll in such plans, since they are often viewed as an extension of existing benefits packages. These plans offer a relatively painless means by which employees pay modest premiums in order to provide substantial life, disability, and annuity benefits for themselves and their families.