Attracting, retaining and rewarding key employees can be challenging. As business owners, you may know first hand just how hard it can be to hold on to top employees. But since they are vital to the life of every business, keeping them committed is essential. Loyal employees are hard to come by, and with recruiting and training costs on the rise, keeping reliable, quality employees is more important than ever.
The problem is how do you reward your employees without going broke or giving up ownership?
A helpful strategy to offer your talented employees is an “Executive Bonus Plan” with whole life insurance.
There are times when a business owner is looking for a straightforward and uncomplicated solution to Attracting, Hiring, Retaining and Rewarding Key Employees. The “Executive Bonus Plan” is one strategy an employer can use with generally tax deductible bonus payments to provide life insurance for selected employees with relatively little out-of-pocket cost to the employee.
There are many situations that employers can use this strategy including stockholder employees of closely held C corporations. Assuming the bonus amount is reasonable, the owners can do this for themselves, excluding all other employees if they wish. In a family business, even if the owners don’t want to participate, in can be used to pay premiums for insurance on children active in the business.
Other strategies are for non-owner key employees. An “Executive Bonus Plan” may serve as an alternative to giving an employee an ownership stake or a substantial salary increase.
Winner Winner
Employer:
1)The employer wins with the premiums paid by the business may be tax deductible.
2)This is a solid strategy for attracting, hiring, retaining and rewarding employees.
Employee:
1)The employee pays tax on the bonus
2) Cash values grow tax-deferred. Income and growth on accumulated cash values are generally taxable only upon surrender or lapse.
3)For most policies, withdrawals are free from federal income tax to the extent of the investment in the contract, and policy loans are also tax-free so long as the policy does not terminate before the death of the insured. However, if the policy is a Modified Endowment Contract (MEC), a withdrawal or policy loan may be taxable upon receipt. Further, unpaid loan interest on a MEC may be taxable. A MEC is a contract received in exchange for a MEC or for which premiums paid during a seven-year testing period exceed prescribed premium limits (7-pay premiums).
Business owners, CFO’s and Human Resources Managers that are interested in empowering their employees and give them peace of mind, create loyalty and be more productive should look into the “Executive Bonus Plan.”
Thank you for reading and sharing.
Until Next Time,
Scott
P.S. If you would like to speak to our firm about these types of strategies please email us at info@commonfinancialsense.com
This material is intended for internal educational purposes only and is not meant for general distribution. The information in this publication is general in nature and subject to change. RCM Wealth Advisors do not provide legal and tax advice. Applicable laws and regulations are complex and subject to change.
Investment advisory services offered through RCM Wealth Advisors, an SEC Registered Investment Adviser. SEC registration does not imply any level of skill or training. CrossPoint Wealth, LLC.
