Business Center

Center for Business
& Estate Planning

Business Planning

Executive Bonus

Executive bonus plans can help employers reward select employees, supplement existing benefit plans, stimulate better employee performance, provide a cost-effective benefit replacement for group term life insurance and minimize reporting requirements.

Under an Executive Bonus Plan (also known as a Section 162 Plan), the employer provides a bonus to select employees in the form of cash or in the form of premiums on life insurance or disability income insurance policies on the employees' lives. The executive receives the bonus as taxable income; and the employer is provided with a business tax deduction provided the bonus qualifies as reasonable compensation to the executive.

An Executive Bonus is different from key person insurance because it is employer-financed personal life or disability income insurance, intended to benefit the selected employees, whereas key person insurance is intended to protect the business from losses resulting from the employee's death.

By providing a bonus to select employees, an employer is able to provide additional compensation to certain employees and deduct the premiums for a policy on either the employee's life insurance or disability incomeinsurance (provided it qualifies as reasonable compensation).

With life insurance, the death proceeds are usually received income tax-free by the employee's beneficiary and with disability income insurance, benefits are generally received income tax free by the employee if the employee pays the premiums.

Benefits to the Employer:

  • The bonus plan is simple to create
  • The bonus amounts are tax deductible for the business (subject to reasonable compensation limits)
  • The bonus helps the employer attract, retain and reward key employees
  • The employer has flexibility in bonus amounts
  • There are no government limits on funding; the plan requires no IRS approval or negligible administration

Benefits to the Executive:

  • The executive owns the insurance policy
  • The executive incurs little out-of-pocket cost
  • The executive gains tax-deferred growth of the cash value, which can be used to pay for a child's education, retirement or other purposes
  • The death benefit will be received by the executive's beneficiaries income tax-free and possibly estate tax-free

Securities products and services are offered through Park Avenue Securities LLC (PAS) 244 Boulevard of the Allies, Pittsburgh PA 15222 1.412.391.6700. PAS is an indirect wholly-owned stock subsidiary of Guardian. Neither Lifetime Financial Growth, LLC. nor Luttner Financial Group Ltd. are affiliates or subsidiaries of PAS or Guardian.

 

PAS is a member FINRA, SIPC.

 

The Information on this site is intended for the residents of Pennsylvania, Ohio, West Virginia, and Maryland. The financial representatives of Lifetime Financial Growth are not licensed to sell securities in all 50 states. To find out if an agent is licensed in your state, please contact Cheri McElroy at 412-391-6700.

 

We are licensed to sell Insurance in the following states: Pennsylvania,Indiana, West Virginia and Ohio.

 

Guardian, its subsidiaries, agents or employees do not give tax or legal advice. The Living Balance Sheet® and logo is a registered trademark of The Guardian Life Insurance Company of America (Guardian), New York, NY. Patent pending. The trademark The Living Balance Sheet and the content and graphics in this website which relate or refer to The Living Balance Sheet system are used under license from Guardian.

 

Guardian does not offer Property & Casualty and Individual Health nor do we provide services for them. Disability income and long term care insurance underwritten and issued by Berkshire Life Insurance Company of America, Pittsfield, MA, a wholly owned stock subsidiary of The Guardian Life Insurance Company of America, New York, NY. Products are not available in all states. Product provisions and features may vary by state.

 

Important Consumer Information: A broker-dealer "BD", investment advisor "IA", a BD agent, or IA Representative may only transact business in a state if first registered in the state, or is excluded or exempt from registration in that state as a broker-dealer, investment advisor, BD agent, or IA Representative, as appropriate. Follow-up individualized responses to persons in a state by such a firm or individual that involves either affecting or attempting to affect transactions in securities, or the rendering of personalized investment advice for compensation will not be made without first complying with appropriate registration requirements, or an applicable exemption or exclusion. For information concerning the licensing status or disciplinary history of a broker-dealer, investment advisor, BD agent, or IA rep, a consumer should contact his or her state securities law administrator.

 

This Internet site may contain general information about various investment products. The information or opinions contained in this Internet site should not be construed by any consumer and/or prospective client as an offer to sell or the solicitation of an offer to buy any particular investment product. Such information is directed solely to those individuals who reside in jurisdictions in which the representative is registered in the state where the consumer and/or prospective client reside. Any subsequent direct communication with a consumer and/or prospective client shall only be conducted by a representative that is registered in the state where the consumer and/or prospective client reside.