There are many issues that keep your business owner clients up at night. Choosing the right benefit plan for themselves and their key employees should not be one of them.
In today’s competitive workplace recruiting, retaining, and rewarding key employees is a top priority for your business owner clients. Whether hiring new key people or keeping those that they have come to rely on, benefit plans are often the leveraging tool that makes the difference and puts them ahead of the competition.
As you consider the many options available to them, we believe you should expand your thinking to be certain your business owner clients are also rewarding themselves in the process.
Retirement Planning
A qualified retirement plan is a benefit important to most individuals. Everyone wants to retire at some point in time – but when they will retire and how much money they will need at retirement is unique to their personal situation. Most business owners look at their business as their retirement plan. Their business was built to provide a current income and to be a resource for funding their future. Yet there are many questions associated with this that need to be answered, such as:
- How much is your business worth?
- What is your business worth without you?
- Do you plan to sell your business?
- Do you have a qualified buyer?
Primary Sources of Retirement Money
Today, the primary source of retirement money is within qualified plans, such as:
- 401K plans with an employer
- Simple Plans
- SEP Plans
- IRA’s
- Annuities
- 403 (b) Plans
The reason your clients may generally like qualified plans is because it’s a straightforward way for them to accumulate wealth and save on their taxes. HOWEVER, your clients will be required to pay income taxes to the IRS during the distribution phase. So, what’s the solution?…
Life Insurance for Business Owners: Premier Bonus
Your business owner clients might think of life insurance as a tool just to protect their family, but life insurance can serve more purposes than just basic death benefit protection. Life insurance is a tax-deferred accumulation vehicle that (if properly structured) can provide business owners with options to mitigate their tax burden while rewarding themselves and/or their key employees.
In Internal Revenue Code Section 162, the IRS states that an employer may deduct ordinary and necessary business expenses like salary and other compensation such as benefits. One non-qualified plan your business owner clients may utilize is called a Premier Bonus Plan
A Premier Bonus Plan utilizes permanent, cash value life insurance and was created as a strategy for business owners to reward themselves and their key employees with a tax-advantaged retirement program. The advantage for the business owner in this strategy is the premier bonus plan counts as salary. That allows the employer to reward their employee(s) while claiming the bonus as a deduction on their business taxes for premiums paid into the policy. Other benefits to the business owner include:
- The plan requires no administration costs, IRS approval, or complicated setup.
- It provides a powerful means to attract, motivate, and retain quality employees.
- The plan may be provided on a selective basis, allowing the employer to choose specific employees to participate.
- The benefit amounts may be varied among participants.
- No IRS Forms
- Not subject to IRC 409A deferred compensation rules.
- Flexible contribution amounts are fully deductible by the business.
Benefits to the employee(s) include:
- A customized non-qualified benefit
- Personal ownership
- Choice in the amount and timing of income
- Cash values protected in market downturns.
- Potential for significant tax deferred accumulation
- Income tax-free access to policy cash values Income tax due on bonus can be paid using policy loans or withdrawals.
Do you think one of your business owner clients may be interested? Input your information below and we will send you a sample proposal, from our software, explaining this strategy that you may share with your client(s):