More and more companies opt to offer their executives what
is known as an "executive bonus", an offer under which the company
pays the premiums on the executive's
life insurance policy. This fringe benefit is a sound business
decision, offering numerous advantages to both employer and
employee.
Other than the added employee loyalty, the employer can deduct
the premium payments, as tax-exempt contributions. The employer
also has a great degree of control, with full power to determine
which employees receive the executive bonus, and the size of
the bonus.
The employee, in turn, receives a very flexible benefit. In
a policy with cash values, the employee can take out loans against
that policy, with no penalties for early withdrawals, as there
would be with an IRA. The executive bonus is also fully portable,
not forcing the executive to remain with a particular employer
for any set amount of time.
The executive
still must claim the premium payments as though they were received
as regular income. Frequently, the employer will add a "gross-up",
an additional bonus meant to cover the employee's tax costs.
Should the executive pass away, the benefits paid out to the
heirs are tax-free.
An executive bonus plan is an attractive offer, which may help
you attract and keep a key employee or, as an employee, may
provide you with added financial security in life and protection
for your family in the case of your unexpected death.
To find out more about the executive bonus plan, we recommend
that you consult with an insurance professional. Our expert
insurance agents will be able to address your specific questions
and concerns.
