Retaining MVPs with Executive Bonus Life Insurance

On the whole, American workers have endured frozen wages and less generous benefits since 2009. At the same time, many of them have been asked to shoulder heavier workloads. This may help explain why more than one-third of employees are hoping to find new jobs in the next 12 months.1

An economic recovery is likely to bring more job opportunities for top performers, and it could prove costly for businesses to replace productive employees who decide to leave. An executive bonus plan funded with cash-value life insurance can be used to reward and retain your most valuable employees.

This type of incentive may appeal to employees who worry about how they will provide for themselves and/or their families in the future. The good news for business owners is that an executive bonus plan may be more flexible than other executive benefit plans.

  • The business pays the premiums with bonuses that are tax deductible to the employer but taxable to the employee. The company decides when to pay the bonuses, so it can control the timing of the expense. Plans may include certain restrictions and vesting requirements that could make the life insurance policy more valuable for an employee who stays with the company.
  • The employee owns the policy and also bears the responsibility to keep it in force. He or she is free to borrow against and sometimes withdraw from cash values to supplement income, to pay tuition for college-bound children, or for any purpose. If the policy is in force at the time of death, the employee’s named beneficiaries will receive the death benefit, minus any outstanding loans, free of income taxes.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that the individuals for whom you are purchasing the policies are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

1) USA Today, March 28, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.
New Century Financial Group
118 Wall Street • Princeton, NJ • 08540
Phone: (609) 924-2049 • Fax: (609) 924-0649
• roring@ncfg.com

 

New Century Financial Group, LLC ("NCFG") is a registered investment adviser with it’s principal place of business in the State of New Jersey. NCFG and its representatives are in compliance with the current registration requirements imposed upon registered investment advisers by those states in which NCFG maintains clients. NCFG may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. This website is limited to the dissemination of general information pertaining to its investment advisery/management services. Any subsequent, direct communication by NCFG with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of NCFG, please contact the U.S. Securities Exchange Commission www.adviserinfo.sec.gov.

Securities offered through Royal Alliance Associates, Inc., member FINRA/SIPC. Advisory services offered through New Century Financial Group, LLC a registered investment advisor not affiliated with Royal Alliance Associates, Inc.

This communication is strictly intended for individuals residing in all 50 States. No offers may be made or accepted from any resident outside the specific state(s) referenced. IMPORTANT CONSUMER INFORMATION A Broker/dealer, investment adviser, BD agent, or IA rep may only transact business in a state if first registered, or is excluded or exempt from state broker/dealer, investment adviser, BD agent, or IA registration requirements as appropriate. Follow-up, individualized responses to persons in a sate by such a firm or individual that involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without first complying with appropriate registration requirements, or an applicable exemption or exclusion. For information concerning the licensing status or disciplinary history of a broker/dealer, investment, adviser, BD agent, or IA rep, a consumer should contact his or her state securities law administrator. 

For additional information about NCFG, including fees and services, send for our disclosure statement as set forth on Form ADV from NCFG using the contact information herein. Please read the disclosure statement carefully before you invest or send money.

SIPC / FINRA
 

PLEASE NOTE:The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. NCFG and Royal Alliance Associates, Inc., make no representation as to the completeness or accuracy of information provided at these web sites. Nor are these companies liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving NCFG’s web site and assume total responsibility and risk for your use of the web sites you are linking to.