An executive bonus plan consist of benefits that company owners and businesses provide to key personnel.
The EBP can provide these benefits by using tax-deductible reserves, and is generally a deductible business expense for the company
The EPB is an important strategy to attract the right talent and retain the best people
These benefits include ;
1. The ability to supplement retirement income
2. Purchase Whole life insurance
3. Purchase Universal Life which accumulates a cash value that is allowed to grow on a tax-deferred basis
Advantages of Executive Bonus Plans:
. Simple to implement
. Easy to manage
. Considered a fully deductible expense to the company
. Executive bonus plans are not subject to "qualified plan limits"
. Key executive has complete control in naming their beneficiary
. Key executive has immediate access to policy cash value without income tax through policy loans and withdrawals, unless there is a "restricted or controlled executive bonus"