New Products and Services.

New England Financial Sells Pension Plan With Policy Inside:

New England Financial, Boston, has launched a version of its top-selling variable universal life insurance product, Zenith Flexible Life 2001, for use within traditional qualified retirement plans.

In the 1980s, life insurance played a key role in small-business retirement plans, said Jack LaBombard, second vice president in charge of retirement-plan design and consulting. But interest waned in the 1990s due to tax law changes, the growing popularity of 401(k) plans and greater interest by employers and employees in mutual funds and investments. Now, life insurance sales to qualified plans are on the rise, he said.

New England Financial's new product offers a level or variable death benefit, 29 subaccounts and a minimum face amount of $25,000 to make it available to lower-paid workers. New England expects small businesses will be more interested in tax-qualified pension plans, with passage earlier this year of the Economic Growth and Tax Relief Reconciliation Act, which sets higher maximum contribution levels, expands tax deductions for employers and provides a tax credit to small-business owners for plan start-up costs.

Business owners and employees may find life insurance a good addition to a qualified plan because premiums are tax-deductible, said LaBombard. And the employee pays lower insurance rates than group term Table I costs, and those rates (from the PS-58 table) are recoverable as part of the cost basis, he said. At death, the pure insurance proceeds (death benefit minus cash value) are income-tax free to the beneficiary, LaBombard added, and proceeds also may be estate-tax free as a result of this year's estate-tax reform.

Without insurance, all distributions from qualified plans are taxable.