Executive Bonus plan
An Executive Bonus plan using life insurance can provide a simple yet powerful retention and recruitment incentive to top performers. Adding cash value life insurance funded with after-tax dollars can help with these advantages:
- An income tax-free death benefit for the beneficiaries
- Tax-deferred growth opportunities
- A tax-efficient financial resource through income tax-free policy loans or withdrawals*
- No contribution limits or penalties for early withdrawals, unlike qualified plans
- Your business pays premiums for a life insurance policy owned personally by the employee.
- Your employee designates a beneficiary for the death benefit and may have access to policy cash values, if any. The employee may have access to policy cash values on a tax-favored basis to address personal needs such as supplemental retirement income.
- Your employee pays income tax on the bonus received.
- At death, your employee’s beneficiary receives the death benefit proceeds, generally income tax-free.
- The business has discretion regarding which employees can participate.
- The plan is easy to implement and maintain.
- The employee owns the policy, has control of the cash value, and names the beneficiary.
- Tax-advantaged income may be available from the policy through partial withdrawals and loans.*
- Cash values accumulate tax-deferred.
- Death benefit proceeds are generally received income-tax free.