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  2. Executive Bonus Policies

Executive Bonus Policies

Reward key employees with life insurance paid with deductible business dollars

Your key employees1 are an important reason that your business is profitable. Employers often use selective, discriminatory fringe benefits to reward those employees whose work is more responsible for creating profits. An Executive Bonus policy is one of these selective benefits.

How an Executive Bonus policy works:

  • The employee takes out a personal life insurance policy and names a beneficiary.
  • The business pays the policy premium to the insurer. It can deduct the premium on its income taxes as long as the total payments to the employee are considered reasonable compensation.
  • The employee pays income taxes on the premium.

Company and key employees take aways

Company feature include:

  • Easy administration
  • Premium payments are deductible expenses
  • IRS qualification/reporting is not required
  • Participants must be considered key employees.

Key employees features include:

  • Business dollars may pay most of the employees' costs
  • The employee's beneficiary receives an income tax-free death benefit
  • They own and control the policy and its cash values
  • It is portable - they can take it with them when they leave the company

An Executive Bonus policy can be an excellent low-cost method to reward employees whose hard work helps make your business profitable.

1 Key employees must be either highly compensated employees or management.

This material may contain a general analysis of federal tax issues. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances. 

Life insurance products contain fees, such as mortality and expense charges (which may increase over time), and may contain restrictions, such as surrender charges. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit.

 
 
 
 
 

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121 Continental Drive, Suite 110, Newark, DE 19713 United States
  •  Tel: (302) 366-0366
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200 E. State Street, Suite 303, Media, PA 19063
  •  Tel: 610.565.9550
  •  Fax: 610.892.0822
  •  service@dsfg.com
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UD Blue Hen 17&43 Award is based on eligibility and selection criteria created and maintained by the University of Delaware.  Working with this firm is not a guarantee of future financial results.  Investors should conduct their own evaluation.

Fastest 50 Award is based on a three-year average (2016, 2017, 2018) of steady and/or significant employee and revenue growth. Working with this firm is not a guarantee of future financial results. Investors should conduct their own evaluation.

DSBC Blue Ribbon Award for Best Professional Company is granted based on the firm's involvement with the local chamber of commerce. Working with this individual or firm is not a guarantee of future financial results. Investors should conduct their own evaluation. 

Diamond State Financial Group is independently owned and operated, and offers its own suite of products and services entirely independent of Securian.

Certain individuals associated with Diamond State Financial Group are registered with and offer securities and investment advisory services through Securian Financial Services, Inc. ("Securian"), a registered broker-dealer and investment adviser, member FINRA / SIPC. Individuals registered with Securian are authorized to offer only those securities and investment advisory services that have been specifically approved by Securian. FINRA's BrokerCheck contains additional information about registered individuals and also indicates whether they are registered representatives and/or investment advisor representatives. You may also refer to their individual bio pages on this website to find their registration status. Not all registered persons are registered as investment advisor representatives.  Only registered persons who are registered as investment advisor representatives use titles "advisor" or "financial advisor" and provide advisory services. For further questions about which individuals associated with Diamond State Financial Group are registered with Securian, as well as information about which securities and investment advisory services such individuals are authorized to offer on Securian's behalf, please contact Securian at 1-800-820-4205.

121 Continental Drive, Suite 110, Newark DE 19713.  (302)366-0366 2953023 DOFU 06/2020

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