Broker Check


| June 17, 2019

Our clients ask us this very question, not knowing if there is a real solution for them. They have thought that if they want to reward one or two employees, they would have to include all employees. In fact, the opposite is true. This article is designed to help clear the air and show employers how they can do this. Here at Innovative Financial Group – Atlanta, we are a full service independent financial firm and have help many of our clients with this exact issue.

The issues-

Finding good help has always been a challenge regardless of the industry. Whether it is the food service, manufacturing, health care, etc. finding the key employee or two is critical for a company to grow and succeed. If you should be lucky enough to find that one, keeping them long-term is the next challenge. With the grass always being greener on the other side, competitors painting a better picture with them, how can you keep from losing the one you worked so hard to find?

The Solution-

Recruit, retain and reward the three R’s for any company. Once you got them, keeping them locked in and focused can be accomplished through an executive bonus plan. Before I explain what this is, let me tell you what it is not

  • It is not a qualified retirement plan
  • There is no reporting requirements or anti-discrimination rules imposed by the IRS. 

An executive bonus plan is an easy to implement employee benefit that will provide you with the opportunity to reward selected handpicked key employees.

How the plan works-

  • You decide which key employees you want to include for this plan
  • Selected employees purchase a life insurance policy, which they own and name the beneficiary as well
  • The premium is paid by the employer in the form of a bonus to the key employees.
  • The bonus is taxed as ordinary income to the employee
  • The employer can generally take a current tax reduction of paid bonus
  • A couple of plan designs options. The employer will choose to bonus the premiums paid or it might be decided to “double bonus” the employee, providing the original bonus (premium) and the taxes due on said bonus.

After the plan has started-

Once the plan is in place, the employer will continue to make the premium payments for the insurance and continue to take a tax reduction of paid bonus. For the employee, several benefits include

  • Complete ownership of insurance policy
  • Living benefits that include tax deferred cash value growth
  • Access to the cash value (through basis and loans)
  • Income tax free death benefit for named beneficiaries

Whether you are looking to recruit, reward or retain top talent, using an executive bonus plan could be just the benefit needed to make yourself and your company stand out among a very crowded field. If we can be a resource or help answer any question(s) regarding this plan or any other, connect with us at