Executive Bonus Plans: A Strategic Employee Benefit Solution
What is an Executive Bonus Plan?
An executive bonus plan (Section 162 bonus plan) is a nonqualified employee benefit arrangement where an employer provides life insurance for selected employees. The employee owns a life insurance policy insuring their life and names a personal beneficiary, while the employer funds the policy premium by paying directly to the insurance company.
An executive bonus plan (Section 162 bonus plan) is a nonqualified employee benefit arrangement where an employer provides life insurance for selected employees. The employee owns a life insurance policy insuring their life and names a personal beneficiary, while the employer funds the policy premium by paying directly to the insurance company.
Plan Setup
The employer identifies key employees who will participate in the executive bonus plan.
Policy Ownership
The employee applies for and owns a life insurance policy on their own life, naming personal beneficiaries.
Premium Payment
The employer pays the premium directly to the insurance company as a bonus to the employee.
Tax Treatment
The premium payment is tax-deductible to the employer and taxable income to the employee.
