Executive Bonus - Top Level Execs and Business Owners Add on to Your 401-K
Many executives in the nation's top Fortune 500 businesses max out on their 401-K contributions as well as other benefits.
This limits their ability to sustain the lifestyle and plans they have for their retirement.
In effect, federal tax law restricts benefits for highly compensated employees.
These same Fortune 500 businesses wish to keep talented and hardworking execs in the fold and not allow competitive interests to lure them away.
How is this done?With an Executive Bonus plan funded with a large life insurance policy with premiums paid for by the company.
It almost sounds too good to be true but non-Fortune 500 execs and small business ownerscan provide themselves the same kind of retirement supplement.
On a relative scale they can enhance the retirement benefits of talented leadership professionals at many successful companies.
For example, an employer/employee agreement is drawn up and a life insurance policy is applied for on the life of the executive or business owner.
A reasonable amount of cash flow is required for the business to fund the premiums on this policy.
The business in effect, makes a gift of the policy to the exec/business owner at some point in time with the business paying the premiums.
The exec becomes the owner, names his/her choice of beneficiaries and has the ability to establish a stream of income from the policy for many years or perhaps for life.
In effect, the company receives a tax deduction for providing this plan and establishing an absolute transfer of all ownership rights in the plan to the exec.
Premiums can be $10,000 to $40,000 per year for a death benefit of $3-5 million.
Cash values will increase over time (often 10-15 years) and at retirement the cash flow is taken out in the form of policy loans that are not taxable to the retiree.
This cash flow can be considerable but many execs will be in lower tax brackets at retirement as a result of EGTRA and provisions in the Pension Protection Act.
401-K plans are qualified plans subject to IRS rules and regulations.
Executive bonus plans are non-qualified and allow the employer to "informally fund" a plan and to discriminate as to which employee will receive the bonus and who won't.
There have been many changes to retirement plans in the past few years particularly in regard to the Pension Protection Act and depending on the information resources of a competent retirement professional is the first step in setting up an Executive Bonus plan.
People who navigate their business through the stormy seas of the present day world of finances, economics and taxes deserve to find safe harbour in their retirement years.
This limits their ability to sustain the lifestyle and plans they have for their retirement.
In effect, federal tax law restricts benefits for highly compensated employees.
These same Fortune 500 businesses wish to keep talented and hardworking execs in the fold and not allow competitive interests to lure them away.
How is this done?With an Executive Bonus plan funded with a large life insurance policy with premiums paid for by the company.
It almost sounds too good to be true but non-Fortune 500 execs and small business ownerscan provide themselves the same kind of retirement supplement.
On a relative scale they can enhance the retirement benefits of talented leadership professionals at many successful companies.
For example, an employer/employee agreement is drawn up and a life insurance policy is applied for on the life of the executive or business owner.
A reasonable amount of cash flow is required for the business to fund the premiums on this policy.
The business in effect, makes a gift of the policy to the exec/business owner at some point in time with the business paying the premiums.
The exec becomes the owner, names his/her choice of beneficiaries and has the ability to establish a stream of income from the policy for many years or perhaps for life.
In effect, the company receives a tax deduction for providing this plan and establishing an absolute transfer of all ownership rights in the plan to the exec.
Premiums can be $10,000 to $40,000 per year for a death benefit of $3-5 million.
Cash values will increase over time (often 10-15 years) and at retirement the cash flow is taken out in the form of policy loans that are not taxable to the retiree.
This cash flow can be considerable but many execs will be in lower tax brackets at retirement as a result of EGTRA and provisions in the Pension Protection Act.
401-K plans are qualified plans subject to IRS rules and regulations.
Executive bonus plans are non-qualified and allow the employer to "informally fund" a plan and to discriminate as to which employee will receive the bonus and who won't.
There have been many changes to retirement plans in the past few years particularly in regard to the Pension Protection Act and depending on the information resources of a competent retirement professional is the first step in setting up an Executive Bonus plan.
People who navigate their business through the stormy seas of the present day world of finances, economics and taxes deserve to find safe harbour in their retirement years.
