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Definitions helps to become more knowledgeable of term life
insurance and permanent life insurance.
Term Life Insurance what it is,
how does it work-
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Employer Executive Bonus Plans
An executive bonus plan is a
method of compensating selected key employees by paying the
premiums of a life insurance policy on the employee's life.
This is actually a salary reduction (defined contribution)
formulated plan. The employer pays for a benefit that is owned
by the executive.
Besides life insurance, the bonus could also take the form of
cash, automobiles, or other items of value to the executive.
With a defined contribution approach, a specified amount (the
salary reduction or employer "bonus") is periodically added to a
participant's "account," which can be either a real accumulation
of funds or simply a bookkeeping account.
Benefits to the Employer:
Can reward key executives Selective participation is allowed
(no discrimination rules)
Costs are tax-deductible
Creation of plan is simple
No administration
Amounts of coverage on various employees can differ
Plan can be terminated without IRS approval or restrictions
A restrictive endorsement can be implemented to limit immediate
access to cash values
Benefits to Executive:
Executive owns the policy1 and cash values.
If he or she changes employers, the policy is not lost.
Accumulating cash values will help in emergencies, at retirement
or for personal investments.
The death benefit may be income tax free. See IRC Sec. 101(a).
Proceeds may be used for estate settlement costs.
The benefit payable at retirement or termination of service
represents the accumulation in the participant's account.
This is similar to the money
purchase approach for qualified plans. Nonqualified plans of
this type are sometimes referred to as money purchase plans.
Contributions typically are a specified percentage of the
employee's current compensation each year. However, the
contribution level can also be an amount determined as the
annual funding required to meet a "target" benefit level at
retirement. If the employee's account is only a bookkeeping
account, in order for the employee to avoid losing the benefit
of investment earnings on the deferred compensation, the
employer can guarantee a specified minimum interest rate on the
bookkeeping account. Alternatively, the employer can make an
annual allocation to the account based on an interest formula or
index specified in the plan (usually an index beyond the
employer's control such as Moody's Bond Index).
Sometimes the rate of return that is guaranteed is tied to the
value of the company's stock.
Note: The intent of this information provided by termlifeamerica.com
is to inform and motivate the general public into action. One
should consider only a qualified practicing legal individual or
entity, in the state in which you reside, when making decisions
on this subject matter.
Related:
We have a highly trained and licensed professional staff. We specialize in all aspects of this discipline.
Included are, Term, Universal, and Permanent Policies, as well
as Final Expense. We guide our clients on issues involving
Personal Family Protection, Estate Planning and Estate Conservation, Business Planning
to include, Buy Sell Agreements, Deferred Compensation, and Executive Compensation. We offer spreadsheets
for
Term Life Insurance Quotes from Top Rated Companies.
We help you decide what type of policy is best for your goals and objectives.
Companies offer 5, 10, 15, 20, 25 or 30 year policies that can include a return of premium plan options. Some plans offer no exam underwriting for your convenience.
We provide consumers with helpful information, find the right life companies, and gives them the opportunity to receive free instant quotes.
The content contained on this insurance website is for informational purposes only. It
is intended for consumers who are shopping and wanting to learn more. We do not endorse any particular carriers. We
work for you and simply provide factual
insurance information. We let you decide if you want to speak with a professional agent to help with your needs. Premium rates displayed on this website are for informational purposes only. Actual rates
are based on many factors one of which is the applicants health.
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