Executive compensation & retirement accumulation strategies attract and retain valuable employees

Executive Bonus Arrangements

Executive Bonus Arrangements (aka section 162) – are “non-qualified” retirement plans which utilize personally owned life insurance policies that have the unique ability to attract, incentivize, and retain key employees. Such plans which incentivize key employees are a necessary part of running a successful business and ensuring its continuity. Advantages include their simplicity as well as the ability to specifically benefit employees in accordance with their individual merit.

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Supplemental Executive Retirement Plan (SERP)

Supplemental Executive Retirement Plan (SERP) –is a non-qualified Employer Funded Deferred Compensation Plan that is used to attract, incentivize, and retain key employees. Utilizing a permanent life insurance policy as a funding mechanism, it is often used where a business does not have a qualified plan but may also be used to supplement existing qualified plans in order to provide additional retirement distribution benefits to key employees, and/or provide death benefits to the key employee’s family.

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Employer Sponsored Split Dollar Techniques

Employer Sponsored Split Dollar Techniques– Split Dollar refers to a “Method” of purchasing life insurance which determines how the premium payments are paid and by whom, as well as how the benefits of the policy itself will ultimately be divided between two entities, either at retirement, or at the death of the insured. Typically this pre-determined split is between an employee and his or her  employer, although the arrangement can also be made between two individuals or between an individual and a trust. The advantage of the Split Dollar Technique is that it is extremely attractive to the employee who receives valuable life insurance protection at a lower cost than if purchased on a personal basis. The employer can make use of a cost-effective technique that enables it to attract, incentivize, and retain their key employees by way of two optional strategies that each have unique advantages.

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Deferred Income Plan (DIP)

A Deferred Income Plan (DIP) is an employee funded retirement plan purposed to conform to IRC section 409A, where a key employee foregoes a salary increase and the employer uses such monies to fund a permanent life insurance policy to benefit the employee at retirement and/or the employee’s beneficiaries at his/her death. At the key employee’s retirement, the plan would pay income to the key employee over a period of years as determined by the DIP agreement which would be funded by the cash values of the life insurance policy. Any death benefit remaining in the policy that may be available for distribution to the employee’s beneficiaries would first be reduced by the withdrawals and/or loans that were distributed from the policy’s basis and/or cash values to fund retirement distributions.

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