Patent ID: 8005739
Filing Date: 2011-08-23
Classification: G06Q

Abstract:
1. A method of funding any portion of a series of defined benefit pension plan payments to plan participants which sponsor of said pension plan is obligated to make, said funding occurring within a plan trust qualified for federal income tax purposes, or otherwise similarly tax advantaged, comprising: (a) a purchase and funding of one or more cash value life insurance policies from one or more life insurance companies on each said plan participant by said plan trust, (b) a collateralized exchange between said plan trust and a facilitating entity of some portion of the death benefits from each said insurance policy on each said participant to said facilitating entity in return for a series of life contingent payments to said plan trust with respect to each said participant for which said plan sponsor has said obligations, with said collateralized exchange taking the form of two separate agreements comprising, and (c) a computerized financial model which uses as input various assumptions that might have baring on the financial consequences of said funding method on said plan sponsor, plan trust, life insurer(s), and facilitating entity, and produces as output the expected economic impact of said funding method on said plan sponsor, plan trust, life insurer(s), and facilitating entity given any specific combination of said input assumptions, whereby said purchase of said insurance policies will result in financial leverage for said plan trust by virtue of additional funds being provided to it by said facilitating entity, and the expectation of plan trust earning greater investment returns on said additional funds than the cost of said funds that is embodied in the said portion of death benefits which said plan trust will pay to said facilitating entity as part of said collateralized exchange, with the resulting net financial benefit to said plan trust being quantified by said computerized financial model for any given combination of said input assumptions, and whereby current federal taxation of said collateralized exchange is expected to result in a material deferral of taxes, and therefore a lower present value of taxes, to said facilitating entity in certain plausible economic scenarios which can be identified, tested and quantified by said computerized financial model, and whereby current federal taxation of said collateralized exchange offers a further reduction of present value of taxes paid by said facilitating entity by use of alternative mortality rates that the IRS permits for the calculation of the economic benefits provided under a split dollar arrangement and which implicitly deem the taxable value of death benefit coverage to be less than the actual value of death benefits expected to be realized based upon the assumed mortality rates for said insured plan participants, both death benefit values of which could be estimated and quantified by said computerized financial model for any given combination of said input assumptions, including said alternative mortality rates, and whereby said collateralized exchange can be customized by the exact portion of said death benefits to be conveyed to said facilitating entity, with each incremental reduction in said portion so conveyed, and thereby retained by said plan trust, resulting in greater net value being conveyed from said facilitating entity to said plan trust and thus available to pay said pension plan payments, as so evidenced by output produced by said computerized financial model for any combination of said input assumptions including said portion of said death benefits so conveyed, and whereby said financial leverage, deferral of federal taxes, reduction in federal taxes, and conveyance of value from said facilitating entity to said plan trust can be expected, in combination, to result in increased net financial value to both said facilitating entity and plan trust as evidenced by output produced by said computerized financial model for certain plausible sets of said input assumptions, thereby increasing the viability of said plan sponsor and facilitating entity agreeing to said method of funding said series of pension plan payments to said plan participants and then, once said funding method is so implemented, increasing the probability of said obligations being paid in full by said plan sponsor.