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Consult your tax advisor to see if a "Section 162 Bonus Plan" is a viable option for your company.* |
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Inside Executive Plans
Executive Bonus Plan
Also referred to as an "executive equity" plan, the executive bonus plan*
allows an employer to provide key employees with permanent life insurance
on a tax deductible basis to the employer. The premiums are taxable
income to the employee and are reported as "other compensation".
Benefits to your business include:
 | Control - The employer has total discretion on on which employee or employees to select for this benefit and how much "bonus" (premium) the employee deserves. |
| Ease of administration - Although IRS administration is not required, it is a good idea to have an agreement drafted by an attorney. |
| Tax Savings - The premiums are deductible by the corporation in the year they are paid. |
Benefits to the key employee include:
| Ownership - The employee owns the policy. The employee can take over the premiums if he/she leaves the company. |
| Cash Value - The employee has control over the accumulated cash value in the policy. Cash value accumulates on a tax-deferred basis and can help offset the tax liability of the company paid premiums or can be used to provide supplemental income in retirement.** |
| Permanent Life Insurance Protection - Tax-free death benefits of a life insurance contract are paid directly to the employee's beneficiary. |
*Section 162 Bonus Plans [Section 162(a)(1)] of Internal Revenue Code.
**Consult your tax advisor.