Executive Bonus Plan
Business owners can attract, retain and reward their best employees with an Executive Bonus Plan. An executive bonus arrangement (also referred to as an IRC Section 162 plan) using life insurance allows a business to reward key executives, generally on a tax-deductible basis.
Attract, retain and reward your best employees with an Executive Bonus from Ohio National Financial Services on Vimeo.
Business Success
Businesses today compete for top talent and are willing to invest in attracting and retaining their high-quality employees, especially at strategic levels. However, traditional benefit plans (like 401(k) and Group plans) often fall short of adequately compensating their key employees, due to limitations on qualified plans.
A Section 162 bonus plan can be structured in a number of different ways, depending on what makes the most sense for your company, and what your goals are with regard to the key employee.
Here are a few examples:
Reward the key employee for their loyalty: You can set up a vesting arrangement, restricting their access to the cash value of the policy until predetermined dates, or until they reach retirement. So, the plan becomes a form of “golden handcuffs,” designed to keep the employee working at your company for as long as possible.
Tie the plan to performance: If the employee doesn’t achieve certain goals or benchmarks, you can decrease or withhold the bonus amount.
“Double bonus” the employee: The bonus you pay the employee is considered taxable income. So, if you’re feeling extra generous, you can bonus them enough to cover both the premium and any taxes they’ll owe.
A financial consultation can tell you more about the various options available for you as a business owner.
Schedule a complimentary consultation to learn more about how an Executive Bonus Plan may work in your business.
Business Planning
Much is involved in starting and running a business. Proper planning is prudent for success.
Learn more about our Business Planning Strategies.