WAVE STRENGTH PODCASTHow is Pacific Life’s KEAP Team Helping High Earners Save Pre-tax Dollars?

Pacific Life’s Institutional Division and members of Pacific Life’s Key Executive Advantage Program (KEAP), traveled to San Diego to attend the 2023 NAPA 401(k) Summit. During the conference, the Institutional team filmed several interviews for upcoming episodes of our innovative podcast, The Wave Strength.

In this first episode of the series, host Jim Breen talks with Pacific Life’s Kim Coggin and Joanne Gagnon about KEAP’s turnkey solutions, and how they help advisors design non-qualified deferred compensation plans to meet the needs of their executives and senior leaders. Catch it now, on The Wave Strength.

About Kim Coggin

Kim Coggin is a Field Vice President and Point of Sale Specialist at Pacific Life. She is a highly qualified insurance executive with extensive experience building relationships with prospects, referral sources, and market influencers. Kim has considerable background in the executive benefits market and excels at building relationships with C-level executives and Boards. Kim joined Pacific Life in 2021.

About Joanne Gagnon

Joanne Gagnon is a Field Vice President and Point of Sale Specialist at Pacific Life. Joanne brings more than 30+ years in the life insurance and financial services industries. She specializes in helping financial professionals deploy solutions for business employers to attract and retain executives in the non-qualified deferred compensation market. Joanne has been with Pacific Life for over 18 years.

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Voiceover: Welcome to The Wave Strength. Innovative solutions for a secure retirement. Presented by Pacific Life.

Jim Breen: Hi, everyone, and welcome to another episode of The Wave Strength Podcast series. I'm your host, Jim Breen, head of marketing with Pacific Life's Institutional Division. We are live on the conference floor at the 2023 NAPA 401(k) Summit here in San Diego, California. And joining me here in the makeshift studio are two Pacific Life team members that represent the KEAP program. So, Joanne, Kim, thank you so much for joining us today. And I'm excited to learn more about KEAP and what it has to offer.

Kim Coggin: Thank you.

Joanne Gagnon: Thank you. Excited to be here as well.

Jim Breen: Yeah, absolutely. But before we jump into that, Joanne, maybe you can share a little bit about your role and what you do with Pacific Life Insurance Company.

Joanne Gagnon: So I have been with Pacific Life for 18 years, so I like to point that out because it's just a great company to work for, which you probably already know.

Jim Breen: Absolutely.

Joanne Gagnon: And I cover from Maine to Miami as a point of sale specialist for Non-qualified deferred compensation, mostly because it's a specialty and advisors really need help in this area. So, I go out in person or virtually and help businesses, corporations put together executive benefit plans.

Jim Breen: Excellent. Thanks, Joanne, and thank you for joining us. Kim, perhaps you could share a little bit about your background.

Kim Coggin: Sure. I'm Kim Coggin. I am also a point of sale specialist in the Key Executive Advantage Program for Pacific Life, and I cover the middle swath of the country. So everything between what Joanne covers and Kansas, north to south. And as Joanne mentioned, we are here to work with advisors, with their clients directly with the companies, to build executive benefit plans that really help retain, recruit, and reward their key people.

Jim Breen: Great, Kim, thank you. So let's talk a little bit about KEAP. You know, we're at this great conference, and we're talking with a lot of advisors who are interested in a lot of the solutions Pacific Life brings to the table. KEAP being one of them. I would love to learn more about what KEAP does downstream. You know, yesterday in the podcast we did with Kim, you and Matt, you talked a lot about what you've been doing with KEAP lately. I'd love to go a little further downstream. Let's talk maybe a little bit about those participants,the folks that benefit from this KEAP platform.

Kim Coggin: Okay. Do you want to start us?

Joanne Gagnon: Well, I'll start with the background maybe...

Jim Breen: Thanks, Joanne.

Joanne Gagnon: ...of how we got here. And I mentioned 18 years of Pacific Life, so I wore a lot of hats in distribution with really primarily life insurance advisors. And the one gap that exists in overall planning, especially for high net worth or high earners, is the ability to save more money on a pretax basis.

And what Pacific Life noticed was that we would have people bring opportunities to us, and a lot of times, the opportunity fell apart. And it was really because the advisor lacked the resources to get a plan in place. So how did we get here? We concluded that it would be ideal to have some expertise available to the field as really a resource, an extension of their office to be able to help the advisor figure out how to get out of their comfort zone of what they talk about every single day.

And again, extension of their office to be able to help these mid-sized corporations complete the retirement scheme, if you will, for the highly compensated individual. So that's sort of some of the background of how we decided to do it. Really turnkey from the standpoint that they don't have to go out and create everything customizable from the standpoint that once you select a plan, if you will, you still have to pick 40, 50 different things within it to have it be your plan.

So that's sort of how we got to, I guess, the background of what we're doing. The really key part is that for highly compensated individuals, even with the most recent changes, with the Secure Act and the ability to put more money on a defined contribution basis into their 401(k) plan, people who are highly compensated cannot put enough money away on a pre-tax basis to retire at the same level as those who are rank and file.

Jim Breen: Okay.

Joanne Gagnon: So non-qualified plans are about creating the ability to allow those individuals to defer as much money as they want on a pretax basis or, frankly, from the company to use it as a retention tool instead of, say, doing 401(k) match of X percent or safe harbor. We hope that they do that. But then, on top of it that they also are setting aside discretionary dollars for their highly compensated.

Jim Breen: And that's important because, you know, in true Pacific Life fashion, a company with 155 years of strength and stability, we try and do everything we can to listen to the needs of our clients and customers. And it sounds like KEAP is an example of that, right? There is a need, and KEAP solved that need. You know, Kim, maybe you can share a little bit about your thoughts.

Kim Coggin: Yeah, there was a need in the market, and Pacific Life, you know, given the history and the strength of the relationships with all of the advisors, insurance or otherwise, in the country, there is a gap for the mid-market, and we serve mainly mid-market companies. So we're not serving the big publicly traded companies. They have all of the resources at their disposal, and they have the budgets to pay for that sort of expertise.

The mid-market has really been challenged because to put an executive benefit plan together, you have to find an expert because most people don't specialize. Then you have to find a plan administrator. You have to figure out how the liabilities are going to work. You need to figure out the funding in the account, and all the movable parts. And it's very expensive when you have to go out and find them individually, and there's not a lot of options for kind of the easy button.

That's what keeps us from the corporate sponsor's standpoint because they have to be sponsored by a company. And these plans are not, you know, targeted to individuals, but the individuals participate and benefit. And I think one of the things we enjoy I was mentioning this that we need to explain more to advisors about why you would do it.

It's the pretax component. They can't save enough pretax dollars to replace that income ratio at retirement. But unlike a 401(k), you can have a distribution while employed from these plans without, you know, the 10% penalty and all of that that goes into the 401(k) world. So when companies implement these plans, the question is, who are your key people? What are their ages? Somebody who's 40 has a different financial need immediately and long term than someone, say 55.

Jim Breen: Yes.

Kim Coggin: So these plans are built with what we call in-service distributions, which means they can target a bucket to put dollars into that can be paid out at a point in time in the future that they select at the time they open the account.

Jim Breen: Okay.

Kim Coggin: So let's say I have kids going to college. I want to open up, you know, my employer has one of these plans. I'm going to do an in-service account. I'm going to do a retirement account. And then I'm going to say in seven years, let's say I want those distributions to start being paid to me, and maybe they'll coincide with college tuition for my child. But I'm saving pretax, which everybody knows in the advisor world. You save your money works faster, and far harder for you if you do it pretax and grow it pretax and then pay the taxes on the back end versus after tax and where it is at the same time frame. So that's one of the important things that when we're designing a plan, understanding who the participants are and making sure that the components of the plan serve the needs of those participants. So they're excited about it. And I'm sure you've seen it in enrollments. When you start to have those conversations with participants.

Joanne Gagnon: Yeah. And not only that, but you know, we're talking about participant benefits. You know, sometimes the participant, especially like a tight labor market, you know, what they're seeking is more compensation or, frankly, more participation in the value of the business. And yet a lot of closely held businesses, they don't want to share, say, equity or ownership. And so, from the participant's standpoint, non-qualified plans are a way that they can really benefit and feel vested in the growth of the business without actually having ownership in the growth of the business.

And so it, you know, it's a motivational thing. It works in their favor. They are, you know, basically, they know that their talent is being recognized as part of the organization because, unlike really every other benefit that a company offers, this one says it has to discriminate.

Jim Breen: Yeah.

Joanne Gagnon: And so, you know, the first thing when I help an advisor with an enrollment, the first thing I say to the group of participants is, "Congratulations, you've been selected to be part of this group."

Jim Breen: Interesting.

Kim Coggin: So you're a small select group.

Joanne Gagnon: Small select group.

Kim Coggin: Yeah, I don't think that can be said enough. And Joanne mentioned the closely held companies; most of the companies in the mid-market are closely held. One or two owners or a family that's been in business. And either they can't give equity or they won't because it's a family-owned business, or it's a tight group, or they're looking at key people and saying, "I'd like them to succeed me one day." And these plans can be utilized to, "Okay, I'm going to contribute on your behalf because you perform really well. You're very important to the business. I can't give you equity, but I want you to feel a partnership, an equitable partnership, and then maybe in the future, 10, 15 years down the road, let's look at that pot of money," and maybe that helps you seed the buying out of the brothers or the family to become that business owner. I've got a couple of clients doing that right now. So it really is sponsored by the employer, but it is really customized for those employees and based on that type of business. And I think it's very unique in the market. You can't really discriminate in any other plan out there because our employee broad based.

Jim Breen: Let me ask you both a question here. You both have a lot of history and experience in the industry. We mentioned "feel it" moments a bit ago. You know, can either of you share any kind of "aha" or, you know, story that you know is appropriate to share with the audience? We don't have to reveal names or anything like that. But where you felt, "Wow, you know, what I'm doing is making a difference."

Joanne Gagnon: I have one. It's very specific. I helped a an advisor put a plan in place and say November of 2021 and the company was closely held. They are bio lab a research but closely held so a lot of big publicly traded competitors and the one owner of this very large business wanted to do something to basically compete. And then that's what they said. I have a hard time competing against these other publicly traded companies. So we put this plan in place like 17 individuals, where the employer was carving them out and putting specific dollar amounts aside for them, you know, so discretionary contributions, and then they're making, you know, really investment choices comparable to their 401(k). Okay, fast forward a year later, and the advisor and I are on the phone with the director as we're getting ready for the 2022 or the enrollment of November 2022. And he said, we have five new participants. And I said, "Wow, that's awesome. Business must be really good." And his response was, "Well, business is okay, we're actually cutting costs in other places, but not here," he said. "We're expanding this plan. In fact, we recruited some of those new participants because of this plan, because they're accustomed to say getting equity or stock options and we can't give it. We don't want to give it. But this plan enables us to create that same feel." So that to me was an "aha" moment because the plan went from X like really a 25% increase of participants in one year because the employer recognized the value of what they were giving.

Jim Breen: Amazing. That's a great story.

Kim Coggin: I think it's important to note that when you're talking, especially in the mid-market and in these plans in general, these are not hundreds of people. It's generally ten, 15, 20 participants. So you get more of that one-on-one real interaction because we do the enrollments, we sit with the participants and the advisors and explain the plan because there's a lot of movable parts. But because of that smaller group, but it's a very important group, we get to see firsthand the impact of a plan, get their reactions, get their questions, their concerns. And we can directly, you know, help them understand A) like you said, congratulations. You're in this plan. And, you know, one of the plans that I enrolled, the owner is one owner, one person. She has all these people. They don't sell products or services. They recruit people to place with other companies; Headhunter Recruiting Group. And she was on the calls and just it was a it was a way for her to be able to tell her employees individually, "You are really important to me. You are the core of why this company's successful because of the highly paid salespeople."

And that's really how they generate revenue is placing these people. And they had, I think, a better appreciation of their value to her. These people are in their thirties, so think about that. They're not near retirement. The world is their oyster. So you know how that is. People are calling them and, you know, talking to them about changing jobs, but they all kind of walked away with that, "She really means it, like we're really important here." So when somebody comes calling and throwing money at them, that's a different internal decision process of, "Well, she really does care. She's really talking to me personally, versus I'm just another employee in a mammoth machine." So it really is if advisors will open it up and start talking to their clients; I think they'd be surprised at how those relationships vary and are very strong versus the broad-based employee benefit plans they may be working with.

Jim Breen: Thanks, Kim. Thanks, Joanne. You know, I want to thank you both for sitting with us today and talking about KEAP also sharing these stories that obviously mean a great deal to you both. And I'm hopeful that our audience members enjoyed that as well. So thank you to each of you for being here.

Kim Coggin: Thank you. Thank you.

Jim Breen: Absolutely. And to our audience, thanks for joining us once again here. We're live on the conference floor at the 2023 NAPA 401(k) summit live in San Diego, California. I want to encourage you to head over to YouTube, Google, Spotify, and Audible. Search The Wave Strength bi pacific life and do me a favor subscribe and like that content so that you can stay current with new content as it becomes available. Again, thanks for joining us, and we'll see you next time.

Voiceover: This has been another episode of The Way of Strength presented by Pacific Life. Don't forget to catch us on YouTube and make sure to subscribe. Although this podcast is presented by Pacific Life, the opinions and views expressed are those of the hosts and participants and do not necessarily reflect Pacific Life's views on any of the topics discussed. Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. Pacific Life its affiliates, its distributors and respective representatives do not provide any employer sponsored, qualified plan, administrative services or impartial advice about investments and do not act in a fiduciary capacity for any plan. Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life and Annuity Company. Insurance products can be issued in all states except New York by Pacific Life Insurance Company or Pacific Life, an annuity company in New York. Insurance products are only issued by Pacific Life, an annuity company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products IT issues. This material is provided for informational purposes only and should not be construed as investment tax or legal advice, which are subject to change at any time. Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations. This podcast was recorded on April 3rd, 2023.

Jim Breen: Thanks for joining us on today's show. We'd love to hear from you. Join the conversation below and leave a comment on your thoughts on what the industry can do better for participants as it pertains to lifetime income solutions. And if you'd like more interesting content, click one of these links over here.