Executive Bonus Plans

Executive bonus plans offer exclusive benefits to those that qualify. An employer will purchase and pay for a life insurance policy for a select group of employees only. The employer pays for the policies through a pay raise to the employee(s) in the group that is equal to the policy premium. In some instances, there is also an added bonus to cover the income tax on this additional pay that is taxable.

Employees in this plan will have full rights to the policy and its total cash value and can choose to take tax-free income from the policy in the future.  Sometimes a vesting schedule may be added to an executive bonus plan.

Employee Benefits:

  • The employee owns the policy. They have control over the cash value and naming of the beneficiary of the policy.
  • Tax-free income is available from the policy through partial withdrawals and loans.
  • Cash values and policy values will be accumulated tax-deferred.
  • The employee can choose the timing of the withdrawals.
  • The employee can choose the amount that is withdrawn.
  • Taxes due on the bonus can be covered by an additional bonus amount from the employer
  • Contribution limits are flexible for everyone.

Employer Benefits:

  • You can reward key employees in a discretionary manner.
  • Implementation and maintenance of the plan is easy
  • Premiums are always immediately tax-deductible
  • The employer is not obligated to make premium payments at any time.

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