If you are a business owner you probably provide some basic group life insurance as part of your employee benefits package. This is an important and typically low cost feature that most employees will see as a must have benefit and opt into every year.
However, what about your top talent? Sure, they need basic life insurance coverage as well, but what are you doing to optimize your compensation and benefits package for the top contributors in your business?
How to Use Life Insurance as an Executive Bonus Plan To Reward Your Best People
Having an executive bonus plan as a performance incentive to help you recruit, reward, retain and support your best people is something that every business needs.
There are many complicated and expensive ways to go about this…which might be what you want to see happen. After all, we all need more complexity, expense and overhead in our businesses, right? Probably not.
An executive bonus plan offers you the opportunity to use life insurance and annuities as scalable performance incentives, helping you recruit, reward, retain and retire your best people. It’s simple to establish and administer, and your business may be able to take an immediate income tax deduction as well.
There are some very important distinctions between an executive bonus plan and traditional deferred compensation plans that you should be aware of.
The advantages of an executive bonus plan over traditional deferred
compensation plans may surprise you:
In addition to rewarding employees and top performers through
an executive bonus plan, traditional life insurance offers your employees additional important benefits:
A 401K or a Traditional Deferred Compensation Plan include beneficiary conditions resulting in the account and it’s investment balance transferring to a designated heir in the event of the employee’s death.
However, life insurance provides additional death benefits, including income replacement that can help beneficiaries meet
their immediate and long-term needs.
Life insurance can provide income tax-deferred policy cash value that can be used to enhance retirement income. If withdrawals are structured correctly, they also become a tax free income stream – something we all want and need during our golden years.
Life insurance offers more desirable tax benefits compared with annuities.
It’s flexible, allowing for measurable bonuses that give
your most-talented employees opportunities to contribute
beyond the contribution limits set by traditional retirement plans. At the same time, it is great for retaining general employees by offering them the potential for long term retirement benefits.
The executive bonus plan is a smart, simple way for business
owners to reward the employees who make the greatest
contribution to the success of the business.
We can help you or your company evaluate and establish a bonus plan that is right for you and your employees/business. If you would like to learn more simply click on the contact tab in the lower part of the screen and schedule an appointment, or give us a call.