Problem: Many corporate businessowners need additional life insurance, or would like to provide a life insurance benefit on a selective basis to deserving employees. Many are unwilling, however, to purchase this important protection unless they can deduct the premiums as a business expense.
Solution: An executive bonus plan is a simple, tax-deductible life insurance benefit for shareholders and selected employees. The plan is also available to employees of sole proprietorships and partnerships. The premium may be paid directly by the employer or "bonused" to the employee as additional compensation.
The policy is owned and controlled by the insured employee, whose beneficiary receives the death proceeds tax-free. The employee pays income tax on the premium paid. However, by "double-bonusing" the plan — adding the amounts of the premium and tax to the employee's compensation — the employee's out-of-pocket cost can be eliminated.
Reference: Executive Bonus Plan Adviser Guide (Form 1470), Executive Bonus Client Guide (Form 2300), Executive Fringe Benefits (Form 2416), Side By Side Business Insurance Plan Comparisons (Form 2415), Client PowerPoint Presentation (ON-Net software download).
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