An Executive Bonus Plan, Incentive Bonus Plan, or Nonqualified Deferred Compensation Plan can offer options and flexibility to drive success for many types of firms and employees.
According to Principal, flexible options in Executive Bonus Plans allow companies to give back to their key employees, whose leadership and expertise are hard to match – and hard to find. This boost in a firm’s benefits package can be flexible enough to cater to different stages of employee management, as well as the different ways your top talent is motivated.
Here are the helpful tactics to Recruit, Retain, Reward, and Retire “Key Employees” with quick strategies on each one.
Let’s take a deeper dive at one strategy that’s easy to start, understand, and provide excellent benefits for Key Employees with an Executive Bonus Plan.
A Section 162 Executive Bonus Plan is a way to attract, reward, retain, and retire key employees using life insurance.
The employer takes out a life insurance policy on a key employee. The employee is the owner of the policy, and gets to determine the beneficiaries and manage the funds within the policy. The employer covers the cost of the policy by periodically giving the employee a bonus big enough to pay the policy premiums. The employee then pays the premiums to the insurance carrier.
When the employee reaches retirement age — or sooner, depending on how the arrangement is set up — they can access the cash value of the policy for extra income if they want. If the employee dies, the death benefit of the policy would go to their family or other named beneficiaries.1
Setting the Plan Up for Success:
An executive bonus plan funded with life insurance is designed to reduce turnover of key employees that could result in potentially significant financial losses.
This strategy can reward key employees with a unique and exclusive benefit that provides protection for their families during their employment, and later, a potential supplement to retirement income. (2)
Want another benefit to recruit, reward, retain and retire key employees without being an expert? Then maybe an Executive Bonus Plan could work to potentially achieve all of these goals.