Executive Bonus Plan

                             How to retain and attract top talent

An Executive Bonus Plan (under IRS Section 162) is one way for business owners and companies to provide additional compensation and supplemental benefits to some key employees or executives of their choice. The Executive Bonus Plan benefits usually include some life insurance policy death benefits as well as cash value accumulations that can be used to supplement  their retirement income. With Executive Bonus Plans, the business can use tax deductible company money to selectively provide valuable financial benefits to key people. An executive benefit plan, used effectively, can be a valuable tool to attract and retain key executives.

Scenario: Beth Ann Barclay is considering a position as a financial comptroller for the CoCoBean Coffee Company. The Beanery needs to fill this high-level position quickly and needs to offer Beth Ann an incentive to join the company and stay there.

Strategy:
Develop a customized supplemental retirement benefit for the employee, called an Executive Bonus Plan, to provide additional retirement benefits beyond those offered in the company’s qualified retirement plan. In addition, the Executive Bonus Plan will provide death benefit protection for the employee’s family in the event of her death.

The Executive Bonus Plan is used to pay premiums annually to fund annuity, disability income or life insurance policy. The CoCoBean Coffee Company gets a deduction for the bonus it pays out and Beth Ann has to claim the annual executive bonus amount on her taxes as ordinary income.

The Executive Bonus Plan product is owned by the Funding Vehicle individual and if an annuity or life insurance policy is chosen, policy values may be used to help supplement retirement income. Disability or death benefit payments are made to the individual or individual's estate/beneficiaries tax-free.

In Addition the Executive Bonus Plan will:

• Provide an income tax-free death benefit will be paid to Beth Ann’s beneficiary upon her death.

• And because there are various alternative approaches in structuring the bonus arrangement so that there are no out-of-pocket costs associated with this program for the employee (Double Bonus or Leveraged 162 Bonus). Please consult your tax advisor for more information.

In the competitive job market, people are leaving their jobs left and right, and it is difficult to find qualified people to fill these positions. The company’s incentive package has qualified plan benefits, but people are still leaving. One way to retain, reward, and recruit key employees is to establish an Executive Bonus Plan.

Many successful companies usually understand the importance of rewarding some of their key employees. An executive compensation package option that offers simple plan that is easy to implement is the Executive Bonus Plan.

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