In today’s competitive environment, attracting and retaining top executives is more difficult than ever and demands creative solutions. Executive benefits may offer your best employees a higher level of benefits and compensation along with significant tax advantages. They also compensate for the fact that most 401(k) programs restrict the ability of executives to accumulate enough money on a tax-favored basis to fund the retirement lifestyle they desire.
Supplemental Disability Income Insurance
For highly compensated executives, the maximum disability benefit may amount to less than 50% of their take-home pay in the event of a disability. To address this problem, employers often purchase additional individual disability income policies on these executives to bring their total benefit, on a percentage basis, up to the same level of all other employees.
Disability insurance is paid for by the company on a tax-deductible basis to provide the executive protection in case of a permanent disability. This coverage can be provided to a select group of employees. Benefits received are taxable, but the employee can elect to treat the premium as additional compensation currently and receive tax-free benefits at time of disability.
Long-Term Care Insurance
For years, companies have focused on creating benefit packages that provide financial security to key executives and their families as a means of attracting and retaining skilled executives. Times are changing; a secure financial future is no longer enough. Companies recognizing this need are now offering long-term care insurance as an enticing executive benefit.
Leverage the Expertise of Your Financial Advisor
Planning for the financial security of your business is a complex but rewarding process and the key to a successful business transition is early planning and implementation.
Your trusted financial advisor can help you evaluate the needs of your business, family, partners and employees and build a plan that achieves your estate, retirement and succession planning goals.
Executive Retention Plans
Section 162 plans, often called “Executive Bonus Plans,” are a simple way to reward your top people and can offer certain tax advantages.
A Supplemental Executive Retirement Plan (SERP), or Golden Handcuff Plan, is another option used to reward or retain key executives. These plans can be designed to allow the employer to enhance compensation arrangements for their key employees by agreeing to provide future supplemental retirement income in return for reaching a set of predetermined company objectives. Often life and disability income insurance policies are used to help informally fund the payments.
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