Your business provides you and your employees that you select with extra income (a bonus) to be used to buy permanent life insurance. This is called an executive bonus arrangement. As a bonus, it is considered income to your employees, but income tax-deductible to your business, under IRC §162. And your employees may like that they get needed death benefit protection, plus potential access to money through a policy’s cash value.1
The arrangement can include “golden handcuffs.” This means that your employee must meet certain obligations, like staying with the company for a specified time, in order to benefit from the life insurance policy’s accumulated cash value. Note that “golden handcuffs” may impact the business’s tax advantages.
Share the costs, share the benefits.
Your business and an employee split the cost of a permanent life insurance policy, along with the cash value1and death benefit. This is known as a split dollar arrangement. It’s a relatively low-cost way to provide an extra, attractive benefit to an employee. It’s also a cheaper way for an employee to get needed life insurance coverage and potential access to cash value.