It seems the idea of a roundtable approach — one in which all the skill sets represented in a well-developed financial plan including accountants, attorneys, estate planners, financial planners, insurance agents, revenue managers, actuaries and tax specialists work together — is gaining ground in the financial services industry as well.

The trend and real value out there right now is linking the relationships among asset protection, tax reduction, the investments, insurance, and estate planning professionals. There is a nexus between all of these different sub-specialties, and really what is required for an efficient and effective outcome. Coordinating these specialties is akin to creating a client’s own board of advisers, except that the board helps other clients as well.

This approach works for clients, especially for those who want and value the advice and input from experts in each field. Take for example a recent client request: A large medical practice with 70 surgeons and 450 employees. The CEO was tasked with vetting available ERISA and non-qualified benefit plans. Where to start?

First, some background. The bulk of our clients are physicians and medical practices. They are professionals whose biggest obstacles aren’t related to their advanced training, enabling them to diagnose disease and recommend treatment. At this juncture, physicians who are solo practitioners, or in partnerships of two to 100, are more challenged with keeping cash flow and revenue streams moving along. This is especially true as we see increases in government regulation and the expense of compliance, fee compression, employee benefits, government regulation increases, competition from foreign practitioners and the basic costs of doing business. Also, just as important and hovering in the background are impending tax increases, threats to the U.S. and global economy, and a general lack of trust in financial services.

In the past, physicians made most of their money from clinical work. Today, they earn only a portion out of clinical. They own the ambulatory surgical centers, the laboratories, the pharmacy, the dispenser of durable medical equipment, and they own the real estate where they have their offices. They have created multiple LLCs, cross state lines, have multiple EINs, and create multiple streams of revenue based on these platforms from which they dispense medical advice. They perform procedures and provide treatment at non-profit hospitals and for-profit hospitals, and have all kinds of MSO, employment and compensation arrangements.

Within these new arrangements, in addition to health care law, employment law, HIPPA, etc …. We have ERISA (Employee Retirement Income Security Act), for those that want to continue to offer retirement and group benefits.

Enter the chief planning officer (CPO) — the individual or group responsible for arranging the specialists responsible for weighing in on important decisions and keeping the physician group compliant.

Now back to our example. This group wants to vet and compare ERISA-based qualified retirement plans and non-Qualified Benefit plans with a tilt toward the high-income professionals. So we assembled the highest quality specialists from around the country, and set out to review 401k, Safe Harbor, matching, profit share, and defined benefit (and cash balance) — all with cross-testing and thorough analysis of the census. We also looked at four types of non-qualified plans. One of which was developed by Larry Bell called a 457DBO, Death Benefit Only Plan.

The DBO Plan

Some highlights of the 457DBO plan provide voluntary premiums on a salary reduction basis, voluntary participation, current death benefit, and no corporate funding commitment. The products used in the plan offer participants the ability to transfer risk against premature death and investment risk based on guarantees. For long-term planners, the products can be used to address estate tax and planning, philanthropy, chronic illness, and supplemental retirement income. Call it a “wait-and-see” component to your client’s financial planning proposition. As a non-ERISA program, the attractiveness of the design is its simplicity and ability to adapt.

The scope of the actual detailed analysis for all four plans is too detailed for this article. (For more on the DBO plan, see “New Regulations Affect ’457 Plans for Non Profits) The analysis relies on multiple IRC building blocks, financial comparisons and actuarial equivalencies. Additionally, the plans have been vetted by the insurance manufacturers and their advanced planning legal teams. The quantifiable results are in the millions for the participants and savings for the plan sponsors.

Conclusion

We have seen a surge of insurance-based solutions. It is important to note that each client opportunity requires a thorough review and proposal. Each plan we have vetted is specific to the client containing nuances and client centric situations. The general fact pattern, however, is to provide tax efficient, low cost, low investment risk, and low administration strategy and products, while addressing savings, investing, and flexibility for life longevity concerns. Necessity is the mother of invention.

Michael S. Berry, ChFC, is a managing member and founder of Michael Scott Financial and Flagpole Capital. Lawrence L. Bell, has served as Tax Bar liaison to the IRS for 10 years. He has received patents in actuarial product fields dealing with COLI, GASB, FASB, IASB and OPEB solutions. To learn more, visit www.mycpo.net.

Disclosures: Michael Scott Financial LLC is a financial consulting firm providing analysis including asset protection, tax, corporate structure, benefits plan design, retirement planning, education planning, financial planning, estate planning, business succession planning, asset allocation, and insurance. Flagpole Capital LLC is a wealth management, asset management, and ongoing financial planning firm providing these services to individuals, small and medium size corporations/businesses. This article is provided for educational purposes only. Please consult with your tax adviser.