FAQ » Vantage - Executive Bonus FAQ
The owner of an Executive Bonus Life Insurance Plan is typically the employer. As the policyholder, the employer pays premiums and receives a tax deduction for these payments. In addition, the employee’s beneficiary will receive the death benefit from the policy when they pass away.
Since these plans are funded with post tax dollars, it means that they are portable. The employee can continue to make the premiums payments if they leave the employer if they choose to do so. This is a positive to the plan as the employee doesn't have to start over.
Plans can be funded in several ways, One of the most popular ways is by the owner. The death benefit is only ONE of the ways the employee can benefit from this plan. They can also obtain lump sum distributions from the cash value, or tax-free retirement income.
Generally, the death benefit of an Executive Bonus Life Insurance Plan is not taxable. However, any dividends or other cash values from the policy may be subject to taxation. Therefore, checking with your plan administrator for more information is essential.
Yes, if the employer provides an executive bonus plan and pays for the premiums, they may be able to take a tax deduction. This is based on Internal Revenue Code Section 162, which allows employers to deduct ordinary and necessary business expenses such as salary, bonuses, and other compensation, including benefits.
No employers offer executive bonus life insurance as a non-qualified benefit to key executives. The employer’s contribution to this plan is part of the executive’s salary.
The executive bonus plan benefits the key employee who can choose the beneficiary and enjoy additional perks like cash value and accelerated benefits from their own life insurance policy.
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