Under IRC §162, your business pays premiums on a permanent life policy owned by a key executive. The premium is a tax-deductible bonus to the business, and the executive gets valuable life coverage plus cash value — a powerful golden-handcuff retention tool.
Who it's for
Coverage built around your needs
Tax-Deductible to the Business
Premiums are treated as reasonable compensation — a deductible expense that reduces the company's tax bill.
Golden Handcuffs
Vesting schedules (restricted §162 bonus plans) reward executives for staying, aligning them with the business long-term.
Executive-Owned Value
The executive owns the policy, its cash value and death benefit — a benefit they can see and feel.
Simple to Administer
Far less complex than qualified plans — no ERISA testing, flexible eligibility, easy to add or remove participants.
What this protects
- Tax-deductible premium bonuses
- Permanent life coverage for the executive
- Cash-value accumulation
- Optional vesting (restricted §162)
- Selective — offer to whomever you choose
- Minimal administration & no ERISA testing
Carriers we shop for this
Executive Bonus Plans (§162) questions
Because the premium is paid as additional compensation (a bonus) to the executive, it's deductible to the business like salary. The executive reports the bonus as income; a 'double bonus' plan can also cover their tax on it.
Related solutions
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Buy-Sell Agreements
Life-insurance-funded agreements that keep your business in the right hands.
401(k) & Qualified Plans
Safe Harbor, Solo 401(k), SEP-IRA and Defined Benefit plans that cut taxes and reward your team.