Executive Bonus Plans, often referred to as section 162 Bonus Arrangements, are a simple and cost effective way for the employer to provide an employee with supplemental retirement income. In this situation the employer provides a bonus to the employee in the form of a premium payment on a life insurance policy.
HOW IT WORKS:
The employer determines which employees to include in the plan. The employees will apply for life insurance. The employer will provide the employees with a bonus in the form of the premium payments on the life insurance policy. The employee is responsible for paying the income tax due on the bonus. However, the employer may elect to bonus the employee the bonus and the income tax amount. This is known as a double bonus arrangement.
At retirement, the employee will be able to use the policy's cash value for supplemental retirement income. Moreover, the employee has been provided with permanent life insurance protection for the benefit of his or her family.
ADVANTAGES
Employer:
-Minimal set-up cost
-Selective participation allowed
-Encourages employee loyalty
Employee:
-Portable death benefit protection
- Source of supplemental retirement income
-Not subject to qualified plan limits and penalty provisions
For more information please contact me at (949)275-6233.