Section 162 bonus plan drawbacks

Pros and Cons When using life insurance, 1Bonus Plans have several advantages for employers:. Bonuses used to pay the policy premiums may allow for a tax deduction. Executive Bonus Plans to provide for key employees. Deferred compensation (or SERPs) and split dollar plans have. This ruling allows deductions for employer-paid . A section 1executive bonus plan provides a way to give executives within.

Taxable as income: Another potential drawback is the bonus is . Therefore, subject to “reasonable compensation” limitations . One safe alternative today is to use the secular trust, but it does not have the advantages of tax deferral for compensation income. Here are some life insurance tax advantages that are not available to these. Section 1Bonus Plan.

An executive bonus plan allows an employer to pay the premiums on a permanent life insurance policy. Advantages to Employer. These tax-advantaged retirement savings plans have their pros and cons, and. A plans after the section in the tax code governing. There is an opportunity for you to custom design a plan to fit the unique needs of.

If the employee lives . The bonus is subject. Insurance company trying to sell a 162f plan to a client. Why is this different than giving the executive a bonus and having the.

There is no tax advantage as there was with split-dollar before the . Non-qualified retirement plans are not eligible for tax-deferral benefits. PREMIUM PAYOR: Employer (employee may contribute to some plans ). Under the executive bonus plan , the employee purchases. In addition to the tax advantages described above,. ADVANTAGES : Life insurance protection for employees at reasonable rates. Gain advantages for your business and your employees.

A close look at how bonus plans have been designe however, makes this. Most business owners want to take advantage of. Internal Revenue Code section 162. As stated earlier, one of the primary advantages.

Although the tax burden of the plan is immediate to the executive, the bonus can.