The Employee Retention Credit creates a great opportunity for agents to help their clients funnel tax credit money back into annuities and life insurance.
The clock is ticking for businesses to claim their Employee Retention Credit (ERC), and agents are in a position to help remind their commercial clients about the opportunity.
The government set aside $400 billion dollars in COVID-19 relief for small businesses for ERC, a refundable tax credit designed to encourage eligible employers to keep employees on their payroll despite experiencing an economic hardship related to COVID-19, according to the IRS. This money was appropriated in the same legislative act that created the Paycheck Protection Program (PPP).
While many small business owners may not have heard of the program or even believe they qualify, the law around the ERC has changed. Companies no longer need to have experienced steep revenue declines during the pandemic to be eligible for the credit. Organizations with less than 500 W-2 employees can qualify due to full or partial shutdown orders or supply-chain disruptions even if they already received funding from the PPP.
Restaurants, law firms, pool supply companies, doctors, churches and many other types of businesses are all receiving millions of dollars of unexpected income from the IRS. This is a great opportunity for agents to help their clients funnel that money back into annuities and life insurance—and earn big along the way.
For example: A company owner with 50 W-2 employees would get back approximately $770,000 from the IRS. That money could fund a single premium immediate annuity for $448,000, 14 times the annual premium of $44,520. The 14 annuity payments can then go into a life policy for a 64-year-old male non-smoker. The cash value at 15 years would be roughly what the client got back to start with—$700,000—and the death benefit would be $1.7 million.
In this instance, an advisor would receive commissions for helping the client get the ERC, the annuity and the life policy. With the above example, the commission would likely be over $100,000.
Here are four steps qualified advisors can follow to help their clients with the ERC:
1) Get started now. As financial professionals, insurance agents are ideally situated to talk to their clients about the ERC. With support and initial training, appropriate licensing for life and annuities if you plan to sell the products, and checking in with your errors & omissions carrier, agents can scale up fast, which is imperative, as ERC funding is expected to run out by mid-2024.
2) Recognize the opportunity. Trust is important. Business owners are being hounded by call centers to get their ERC applications in. Financial professionals such as independent agents are best positioned to have the first conversations with clients about the ERC, given their existing relationships and books of business.
3) Scale up fast. It takes some time to learn the intricacies of the ERC program and to explain it to clients. Selecting a partner who can support you will speed up the process. Some partners can also offer the needed training and support for the agents, and enable you to ramp up fast.
4) Continue supporting your team. Once you've given your producers all they need to know to get ERC money on the way to clients, don't leave them unsupported. The partner you choose should help your sales team stay up to date on changes in the program, learn more and share ideas for reaching new prospects.
Wes Wessel, regularly holds webinars for agents and agency owners on Eventbrite about the opportunity with the ERC. Wes is an affiliate of ERC Specialists and offers select insurance brokers affiliate status as well.
This article is intended for general informational purposes only, and any opinions expressed are solely those of the author(s). The article is provided “as is" with no warranties or representations of any kind, and any liability is disclaimed that is in any way connected to reliance on or use of the information contained therein. The article is not intended to constitute and should not be considered legal or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought.