Trust Refunds are an integral part of the life insurance plans offered through the AICPA. Understanding how the refunds reduce premium contributions is important when evaluating plans. In this article, we will examine how the AICPA Trust Refunds impact members.
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Why A Trust Fund?
Insurance companies determine their rates based several factors, including claims and expenses. The AICPA Trust does the same thing, however, they have the ability to increase or decrease premiums on an annual basis. Depending on the overall profitability of the Trust, the annual refund can be higher or lower than the previous year.
When comparing the AICPA life insurance rates to other companies, we take into account the annual refund. However, it’s important to note that the Trust holds your premium contribution until the refund is distributed every year. In other words, you are forfeiting interest you could have earned on the additional premium (referred to as “contributions” by the AICPA).
The AICPA Trust refunds are distributed to trust plan participants in mid-February.
Each year participants receive a K-1 statement. According to the AICPA,
“Earnings by each Trust are redistributed back to the members of the applicable Trust as part of the Annual Refund. The K-1 statement specifies your portion of the taxable interest earned by the AICPA Insurance Trust or AICPA Group Insurance Trust.”
How Your Life Insurance Rates Are Affected By The Trust Refund
The Trust refund is no small amount with the CPA Life plans. In fact, the refund ranges from 42% to 57% with the CPA Life (increasing term), depending on your age bracket. You can check out the most recent refund percentages for all the CPA Life plans by clicking here. Also, plans for spouses have lower refund percentages.
Level Premium Term Cash Refunds
The cash refund is a much lower percentage of the total premium with Level Premium Term. Let’s look at some sample rates below:
- 35 year-old female; Preferred rate class / 20 year-term / $1,500,000 face amount: Premium without refund: $81.00/month; Premium with refund: $72.90/month (refund is 10% of total premium).
- 40 year-old male; Preferred rate class / 20-year term / $750,000 face amount: Premium without refund: $66/month; Premium with refund: $59.40/month (refund is 10% of total premium).
- 50 year-old male; Preferred rate class / 20 year-term / $1,000,000 face amount: Premium without refund: $218.00/month Premium with refund: $96.20/month (refund is 10% of total premium).
It is important to note that the Trust Refund in not guaranteed and fluctuates each year. The Trust has paid a refund since it’s inception, so it is highly probable this will continue. Not only is the Trust Refund not guaranteed, but the premium contributions are not guaranteed either. Let’s look at a few highlights of the Trust Fund:
- The Trust has distributed a refund for the past 69 years (since 1947).
- A refund of over $164 million was distributed to members in 2016 – the largest refund ever.
Keep in mind, the AICPA is a very well-run organization. The company insuring all the group plans is Prudential – a very stable A+ rated carrier. So, we don’t think it is very likely that refunds will decrease significantly. Likewise, the rates will most likely remain unchanged (for existing policyholders). However, we know that A+ rated carriers have plummeted in the past. It is a small risk, but a risk nonetheless.
How You Can Increase Your Trust Refund
There are a few ways to increase the refund for which you are eligible.
- Both Spouses Insured. The refund is increased by $25 if both spouses have AICPA life insurance.
- EFT Payment Mode. The refund increases by $25 if you select Electronic Funds Transfer Payment (EFT) for your premium payments.
- Multiple Policies. Members receive an additional $5 if more than one AICPA Trust product is purchased.
- Child Dependent Coverage. There is a decrease of $6 annually if you have select the Child(ren) Dependent Life Rider.
AICPA Life Insurance Trust Refunds – Conclusion
Overall, the AICPA Trust is a stable and effective way to ensure members receive quality insurance products and reasonable rates. Participants eagerly look forward to their Refund check every year. All life insurance products are offered by Prudential Life Insurance Company. Prudential is a very strong and stable company that we often recommend.
Most CPAs are accustomed to looking at the bottom line. We think that most people will fare better (and save a lot of money) by obtaining life insurance through individual carriers. Even with a large refund check, the premiums are usually lower through other companies, especially for people in average to good health.
Many people are adverse to the idea of “loaning” the AICPA Trust premium contribution dollars until a refund is given. This allows the Trust to earn interest on your contributions.
The fact that the rates and the Trust refunds are not guaranteed is another factor to consider. This becomes increasingly important the longer you plan to keep the policy. The likelihood that rates will increase or refunds will decrease is much more likely over the course of 15, 20 years or more.
In conclusion, it is clear that the AICPA Trust Refund is integral to the life insurance policies offered to members. Hopefully, this article has helped you understand the Trust Refund better so you can properly evaluate your options for coverage.
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