College football season is upon us! This is a great time of year to be a fan as teams get ready for another season and run for the national championship. And it may be the best time of year to be a Duke fan, because we’re still undefeated! There’s so much to be excited about right now, with players across the country working to get in shape, learn the playbook and get acquainted with new teammates. At the same time coaches are preparing their team and staff for the grueling college football season, but for those coaches the stakes have never been higher.
Along with keeping the fan base happy, for coaches and their schools, it must be impossible to ignore the HUGE financial stakes that are tied to our national pastime. Top college football programs now routinely bring in over $100 million in revenue annually to their schools. Combining increasingly lucrative TV deals, merchandise and ticket sales, along with incentives for qualifying for one of the Bowl Games at the end of the season, the amount of money to be made has never been greater.
For these schools, football is more than just a game and diversion for their students, it’s big business. And just like any other business, finding ways to recruit and retain key employees is integral in building and maintaining success. In the college game specifically, coaches play a vital role in building programs, as they are some of the biggest stars in the sport and responsible not just for coaching but also recruiting every year and being the face of the program. Many college coaches at large state universities are actually the highest paid public employees of their state, with salaries that can be in the millions of dollars per year. But salary alone may not tell the whole story of how colleges are attracting top coaching talent, as seen in some recent news out of Michigan.
Jim Harbaugh is one of the top coaches in college football and has an outsize personality to match. For a school like Michigan, he’s an asset whose financial impact on the program could be hard to overstate. While he is certainly well compensated with his salary, a recent Freedom of Information Act request also highlighted some of the other benefits that he receives. One of the most interesting is a recent contract amendment that provided for Michigan to loan Harbaugh a total of $14 million over the next 6 years to pay the premium on a life insurance policy. This type of benefit is known as a split dollar loan, and can be a great way to provide additional benefits to key employees in any business, even if they don’t already make millions of dollars in salary.
There are lots of variations on split dollar plans, but at a high level a split dollar plan is a benefit that can provide for:
- Life insurance protection for the key employee.
- Limited out-of-pocket cost to the employee.
- Tax-deferred cash value accumulation inside the life insurance policy.
- Reimbursement to the employer.
- This could be at death, when the loan will be repaid from the death benefit proceeds, or
- The loan may be repaid from the policy’s cash value in the future.1
Split dollar loans can be a great way to provide additional benefits to key employees of any business, and you don’t need to be a football coach making millions of dollars for them to be a fit. So the next time you’re sitting down with a friend or colleague to watch the big game, remember the life insurance policy that may be why your coach is on the sideline. Bring it up, during a commercial break of course, and you’ll likely find fellow fans that are interested in this strategy for their own business.
1The ability of a life insurance contract to accumulate sufficient cash value to repay a loan will be dependent upon the amount of extra premium paid into the policy, and the performance of the policy, and is not guaranteed. Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Surrender charges may reduce the policy’s cash value in early years.