Executive Benefit Plans
Building an Effective Key Employee Compensation Strategy
Chances are the success of your nonprofit organization relies, at least in part, on the talents and performance of your employees. The total compensation package you offer key employees is part of your value proposition to them.
There are different forms of compensation and benefits an employer may offer to recruit, retain and reward key employees to accomplish the goals of the organization.
Like any other business decision that requires an allocation of financial and human resources, it is important to take a strategic approach.
Private Retirement Plan
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A specially designed life insurance policy that allows an employee to structure a supplemental retirement income outside of employersponsored plans without limits on salary or contributions imposed by the IRS. Properly structured, retirement income can be received income tax-free.
Bonus Plan and Restricted Bonus Plan
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An agreement under which the employer, through a bonus to the
employee, pays premiums for a specially designed life insurance policy on the employee’s life. Employers looking for more control over the plan can incorporate a Restricted Executive Bonus Arrangement (REBA), which restricts access to cash values for a predetermined time. Employees receive life insurance coverage and can use cash values for retirement income.
Financed Bonus Plan
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An agreement under which the employer, through a bonus to the employee, pays premiums for a specially designed life insurance policy on the employee’s life. The employer finances a portion of the premium payments which allows more cash to be put into the policy resulting in the opportunity for larger death benefi ts and cash values for retirement income.
457(f) Deferred Comp Defined Benefit
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An agreement in which the employer promises to pay to the employee a set amount at retirement based on a predetermined formula. The
employee’s right to any benefits under the plan are normally restricted through the use of vesting schedules or “golden handcuffs.”
457(f) Deferred Comp Defined Contribution
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An agreement in which the employer contributes funds for the benefit of the employee on a pre-tax basis and interest accumulates tax-deferred. At the employee’s retirement, the total value of the funds is paid out as stated in the
terms of the agreement. (Funds that have not been paid out may continue to accumulate interest.)
Endorsement Split-Dollar
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An agreement where the employer “endorses” or grants to the employee the right to designate a beneficiary for part of the death benefi t in excess of the premiums paid or cash value of a corporate owned life insurance policy. There are two premium options. The employee will pay premiums equal to the Reportable Economic Benefit on his or her portion of the death benefit and the employer will pay the remainder or the employer will pay all premiums due and the employee will receive taxable imputed income equal to the Reportable Economic Benefit on his or her portion of the death benefit.
Loan Regime Split-Dollar
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An agreement in which the employer (premium payer) pays all or a portion of
the premiums on the behalf of the employee (policyowner) and will be repaid from the policy cash values or death benefit. The employer will be deemed to have loaned the premium payments to the employee and the employee will incur annual loan interest. Cash values in excess of the amount due to
the employer can be used to supplement the employee’s retirement income. Funds for the plan may also be provided by the employee by voluntarily reducing their salary which also reduces their current income taxes as well as the employer’s payroll expenses.
Through creative financial tools, we can make your organization an attractive place to work, with sustained increases in benefits.
Unsure where to start?
We’re here to set your organization on the path to success. That starts with fundamental structure and organization that enables you to remain mission-driven.