Executive Bonus Plan

When you are a business owner, there are so many alternative ways to design your company’s benefits in addition to ordinary qualified plans like Simple IRA, Sep IRA, or 401k.   

Section 162 Executive Bonus Arrangements are a way to provide special benefits to the key employees and or business owners of that business.  This bonus arrangement allows a business to provide a permanent life insurance to key executives using tax deductible dollars.

It is simple and easy to implement because there is no IRS filings and no set up costs.   

One of the great benefits is a full tax deduction to the business.

You can be selective of who to participate. It allows the flexibility to bonus different amounts to key employees each year depending on their performance. The bonus amount was paid to a permanent life insurance policy that insured their lives.

The employees can enjoy all benefits of that policy has to offer such as tax free death benefits to their heirs.

With some policies that offer Chronic or Critical Illness or terminal ill, these riders can provide substitute income for those key employees or help cover any cost associated with their illness or injury.

This life insurance policy has cash value that grows on a tax deferral basis. The key employees can access their cash value through withdrawal or loan. 

This permanent policy can supplement their income during retirement. It can fill the gap of shortfall on their qualified plan income. This portion of the income that comes from permanent life insurance will never count towards your ordinary income. As a result, it will never push your income in a higher tax bracket.