Executive Life Insurance

Executive Bonus Plans

Government limits and restrictions on the amount that employees and employers can contribute toward qualified benefit plans such as an IRA, 401(k) or 403(b) leave many highly compensated executives – usually your key people – without enough retirement income to sustain their current standard of living. Implementing a 162(a) bonus plan provides a simple yet effective means of providing supplemental life and/or capital accumulation benefits for a select group of executives.

Supplemental Life Insurance

Supplemental life insurance is an employee benefit often provided to officers and directors of banks and organizations. It’s used to augment existing group term life insurance coverage or, in some cases, to provide life insurance coverage post-retirement. Typically, a legal document between the employee and the employer defines the amount of coverage and the plan terms.

Normally, the employer “finances” this obligation to the employee by purchasing some type of life insurance — either term coverage, which would typically extend until the employee’s retirement or, more commonly, permanent cash value life insurance, paid for and owned by the employer. There are two arrangements by which supplemental life insurance can be provided to employees: Death Benefit Only and Endorsement Split Dollar.

Loan Regime Split-dollar

Properly designed executive programs play an important role in retaining key employees. At the same time, these plans can also mitigate taxes for both the organization and the employees. A solution that may accomplish these objectives for both parties is an executive split-dollar program. The split-dollar arrangement is designed so that the premium is paid by the organization and treated as a “loan” to the key executive. The design provides the executive with an opportunity for tax-preferred savings. Tax-free supplemental retirement income, pre-and post-retirement death benefit coverage, and allows the organization to recover plan costs.

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