The Restricted Property Trust allows business owners and key employees the ability to mitigate income taxes, receive tax-deferred accumulation, and tax-favorable distributions.

One of the key components that makes the Restricted Property Trust so effective from a tax perspective is the whole life insurance policy. The Restricted Property Trust whole life insurance policy provides participants with an income tax-free death benefit, tax-deferred accumulation, and tax-favorable policy distributions.

When an employer makes the annual contribution, they are contributing to both their Death Benefit and Restricted Property Trust (RPT). Upon receipt of the contribution, the third-party trustee of the trust(s) deposits the contribution and makes the premium payments from the trust(s) to the whole life insurance company.

The Restricted Property Trust uses a whole life insurance policy issued by Penn Mutual. Penn Mutual was founded in 1847 and, as the name suggests, is a mutual insurance company headquartered in Pennsylvania.

As a mutual insurance company, Penn Mutual is owned entirely by its policy holders. As a result, the policy holders participate in the profitability of the insurance company in the form of policyholder dividends or reduced future premiums.

Penn Mutual is the carrier of choice for the Restricted Property Trust because of the company’s financial strength and stability. Penn Mutual currently has an A+ rating from both A.M. Best and Standard & Poor’s. They have maintained an “A” rating or better from A.M. Best for 90-years in a row with a surplus exceeding $2.1 billion and annual revenue exceeding $3.2 billion.

Dividend Rate Factors

Mutual insurance companies determine the annual dividend rate using several key factors. A few of these factors include:

  1. Claims Experience. Claims experience is based on the number of projected death benefit payouts versus actual death benefit payouts to policy beneficiaries.
  2. Operating Expenses. Operating expenses are the projected expenses needed to operate the company versus the actual costs for maintaining existing policies and acquiring new policyholders.
  3. Interest Earnings. Interest earnings is the rate the company achieved from its investments of premiums received and surplus.

Once the key dividend measure are considered the insurance company determines how much of the surplus must be set aside to pay future claims and operate the company. From there, the Board of Trustees determines how much of the surplus is available to be paid to policyholders as a dividend.

Penn Mutual’s ability to project claims and operating experience for whole life policies over the last decade has been consistent. Because of their consistency and ability to manage all components of the dividend calculation they are able to continue to offer strong dividend payouts to policyholders every year.

Penn Mutual’s Investment Portfolio

As of December 31, 2018, $13.7 billion of Penn Mutual’s investments included cash, short-term and investment grade bonds. This represented 82.8-percent of their total invested assets.

The remaining invested assets were in Other Invested Assets and Alternative Assets. These investments include investments in limited partnerships, venture capital, private equity, and hedging assets used to protect the company from interest rate and market fluctuations.

Penn Mutual Has One of the Most Consistent and Highest Dividend Rates in the Country

One of the biggest challenges faced by mutual insurance companies is their ability to achieve consistent income regardless of market conditions. Penn Mutual has been one of the most successful carriers when it comes to achieving this.

From 2008 thru 2018, Penn Mutual maintained a 6.34-percent dividend rate. During this time every other mutual company experienced a dividend rate reduction in some form. For instance, in 2008 Northwestern Mutual had a 7.50-percent dividend rate. By 2018, this rate had dropped to 4.90-percent.

And while Penn Mutual reduced their dividend rate from 6.34-percent to 6.10-percent in 2019, this dividend rate remains one of the highest in the industry amongst mutual insurance companies.

In fact, when you compare Penn Mutual’s dividend rate history to other fixed interest vehicles their performance and ability to maintain their dividend is quite impressive.

Penn Mutual Dividend Rate Comparison

Penn Mutual is committed to putting the interest of their policyholders first. With their proven record of paying dividends to policyholders on a consistent basis makes Penn Mutual the ideal carrier for the Restricted Property Trust.

The Penn Mutual whole life insurance policy in the Restricted Property Trust offers participants both death benefit protection and accumulation. Policy accumulations grows tax-deferred, while distributions from the policy are accessible tax-free.

The policy offers several different options based on the needs of the individual participant. In many cases, the original intent of establishing a Restricted Property Trust is to accumulate future income on a favorable basis. But as time and needs change the original goal of the plan can shift from accumulation to death benefit protection.

Because of the flexibility of the policy, changes can be made to the policy to address the ongoing needs of its participants once funding of the Restricted Property Trust is complete. Because of the nature of the Restricted Property Trust policy changes cannot be made while the trust is actively being funded.

To learn more about how you or your company may benefit from a Restricted Property Trust please email us at or click here to request a Restricted Property Trust proposal.

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