The success of your business depends greatly on your ability to recruit and retain talented employees. Not only do you have to attract employees, you must compete with other businesses doing the same thing.
Using our knowledge, we are able to create plans that will provide benefits to both your company and your employees. Read on for a list of areas that we specialize in.
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Key Person Protection
A key employee is someone who is very significant, plays a large role in the business and has substantial impact on the financial standing of the company.
This type of protection helps to reimburse a company for economic loss encountered with the death of a key employee. Loss of such an important employee can cause damage to a company; such as missed sales opportunities, client loss, and expensive replacement costs.
Key person insurance is bought by the business, with the consent of the employee. The business is the beneficiary of the policy. It is important to determine the proper amount of coverage. This is usually calculated by a cost to replace experience method or the contribution to earnings method.
The goal of this plan is to protect the business. The premiums for this policy are not tax deductible, however the death benefits, if structured correctly, may be exempt from federal taxes.
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Cross Purchase Buy/Sell Plans
These plans use life insurance to ensure the continuation of the company after the death of a key employee. The plans are used most commonly for LLCs, partnerships and closely held business.
After legal documents are drawn up, life insurance policies are purchased on all the owners of the business. Owners may pay premiums personally, or the business may pay. This depends on the desired tax structure. If one owner dies, the policy proceeds are normally used by the remaining owners to purchase the company shares of the deceased.
Non-Qualified Deferred Compensation
Also known as “salary continuation” plans, deferred compensation plans provide death and/disability benefits in addition to retirement income for employees chosen by the business.
Beginning at retirement, the employee will receive an agreed upon amount of money for a fixed amount of time. In the event that the employee dies after payment has started, the benefits are then paid to a beneficiary designated by the employee.
Split Dollar Arrangements
After legal documents are drafted, the employer can purchase a cash value life insurance policy for an employee. Payments for the policy premium, as ell as death benefits, are divided in a prearranged manner. Sometimes the employer pays all the premiums, this is known as “economic benefit split-dollar”.
Because it offers a better life insurance protection, and usually costs less than personal coverage, this plan helps to attract and retain key employees.
At the time of the insured employee’s death, a tax-free portion of the death benefits that is equal to or greater than the cash value of the policy is paid to the business. This reimburses the business’s investment. The remainder of the proceeds is paid to the beneficiary.
Executive Bonus Plans
With this arrangement, the employee purchases a life insurance policy and the employer pays the premiums. As compensation for the employer, premiums are tax deductible and taxable to the employee.
The employee has complete control over the policy and beneficiaries. For these reasons, it is very attractive to potential employees and can be used as a tool to retain quality employees.
[Related: Do Your Employees Need a 401K?]
After legal documents have been drafted, the business will buy and own a life insurance policy o each owner. The business will be the beneficiary of the policies and pays the policy premiums.
Premiums are not tax deductible, but the policy proceeds are normally tax free. In the event of an owner’s death, policy proceeds are paid to the business and used to buy the deceased owner’s interest in the business.
This can be an overwhelming process, but we are here to help. Let us help you choose the most effective plans and guide you through executive benefit planning for your company. Contact Blisk Financial Group today.