In today's workplace, employers often seek additional incentives to motivate and reward their key personnel. An Executive Bonus Plan can accomplish that objective. An Executive Bonus Plan is one in where the employer pays the premiums on a permanent life insurance policy owned by the employee. In addition, the life insurance policy that provides the the vehicle for such a plan enables executives to make additional premium contributions if desired.
Some other employee benefits of an Executive Bonus Plan:
-Having control of the cash value of the policy and naming the benficiary
-Availability of tax-free income through policy withdrawals and loans
-Choosing the amount and timing of policy withdrawal
-Cash values of the policy accumulate tax-deferred
-Taxes due on the bonus can be covered by additional bonus compensation by the employer
Some employer benefits of an Exceutive Bonus Plan:
-Ability to reward key executives in a discretionary manner
-Premiums are immediately tax-deductible (Internal Revenue Code Section 162)
-Easy to implement and maintain
-The plan's retaining power may be enhanced by adding restrictive endorsements and vesting schedules
Be sure to consult with your agent or other trusted advisor to learn more about the advantages, disadvantages, potential tax consequences and costs of offering Executive Bonus Plans funded through life insurance.
*Note: Please seek the advice of your agent and other trusted advisors when considering life insurance to fund executive bonus plans. There is a wide array of life insurance products available today and it is impossible to cover each in depth here.
EXECUTIVE BONUS PLANS
*With all life insurance policies any/all guarantees are backed only by the claims paying ability of the individual carrier.