There’s a lot of chatter about a change to the Group Voluntary Universal Life (GVUL) insurance policy benefit, and many pilots are asking what they should do. While Delta Airlines has always had a GVUL option available, the cost of the policy is now being covered by the company for the first time.
How does the GVUL policy work?
By opting in to the policy, the imputed income (benefits you receive as an employee beyond your salary that are considered taxable income) on your paycheck is going to be reduced — in some cases substantially. Based on the chart provided on the Delta GVUL website, the reduction in annual imputed income for a 30-year-old pilot will be $680, while the reduction for a 60-year-old pilot will be $5,300. For a 60-year-old pilot in the 35% tax bracket, that’s a reduction of $1,855 in taxes.
How much will it cost to maintain coverage if I leave Delta?
Here are some more numbers to ponder. In order to keep the policy in force after separation from Delta, a pilot will have to pay the premiums on their own. Based on the premium tables provided by the insurance company, the cost to maintain this policy will be $9,804 per year for a 65-year-old captain who just retired. At the age of 70, the cost goes up to $16,328 per year.
Should I use the investment feature of this policy?
This is where things get a bit more complicated. There’s a lot of info and charts on the Delta GVUL website, but you’ll notice there are also a lot of footnotes and fine print. You would really have to dig into the fine print along with the data to make an informed decision. The good news? We did all the digging for you. And we’d be happy to share our findings in a conversation, asthere’s just too much information to put into this article.
Should I opt in or out?
With open enrollment deadlines looming, we understand pilots want to know whether they should opt in or out of this benefit. Generally, GVUL policies have higher costs compared to term policies. However, because Delta is paying the premiums for active pilots, and because of the favorable tax implications due to the reduction in imputed income, the GVUL policy could be an attractive alternative to the group term policy. However, before you decide to rely on a policy like this in retirement — or decide to use it as an investment vehicle — we highly recommend you first consult with an independent financial advisor.
The Creative Planning Aviation team is incredibly well versed on this benefit, and we’re standing by to answer your questions and help you determine what may be right for you and your financial future. Contact us today to set a meeting.