William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

Enhancing Executive Compensation: 162 Bonus Plans

Posted by William Byrnes on December 31, 2010

An employer who does not want to, or cannot, institute a qualified pension or profit-sharing plan, or who does not want to extend benefits to all of its full-time employees, can use a “Section 162 plan” to meet its executive compensation needs.   A Section 162 plan leverages life insurance to provide supplemental compensation to select employees while also allowing the employer to take an income tax deduction for the premium payments.

In a Section 162 plan, an employer applies for, and pays premiums on, a life insurance policy on its employee’s life. The employee, however, owns the policy and has the right to appoint beneficiaries; the employer does not take an interest in the policy’s death benefit.

As an example of Section 162 plan and its tax advantages, … read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of Section 162 plans, see Advisor’s Main Library: Section 15 C—Executive Bonus – I.R.C. �162 Plan

We invite your questions and comments by posting them below or by calling the Panel of Experts.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: