Executive Bonus

What Is An Executive Bonus Plan?
Known for its simplicity and ease of administration an Executive Bonus Plan allows business owners to provide key employees with permanent life insurance, with a portion (up to the entirety) of premiums paid by the business. Employees pay tax on the premium as "other compensation".*

Who Needs An Executive Bonus Plan?
You may if, as a business owner, you:  

• Wish to single out certain employees for a supplemental benefit.  
• Wish to purchase an Executive Bonus Plan for yourself as an owner-employee

How Does It Work?
With company approval, the employee purchases life insurance on his or her own life. The employee owns the policy (including any accumulated cash value) and names the beneficiary, but the business pays a portion of the annual premium. The premiums are tax deductible to the business, but taxable income for the employee.*

* Executive Bonus Plan at Work:
When his employer offered (key employee) an Executive Bonus Plan, he readily agreed. He purchased a $500,000 policy, with a $4,000 annual premium, which the company paid pursuant to a written agreement between them. This added $1,240 to his annual income tax obligation, but the policy accumulated cash value. By the time he left the company, he had paid a total of $12,400 in additional taxes, and the policy's cash value had grown significantly. Plus, he had the $500,000 death benefit. The company had paid $40,000 in premiums, and deducted the full amount.