Executive Compensation Plans
For your business to succeed, you need to attract and retain top-notch talent. Many private companies have difficulty creating the right mix of compensation that will attract and retain key executive talent. Veracity Advisers will work with you to create a compensation plan that works for your company, so you can retain the talent that helps your company maintain its success.
We address the following questions with you and build a cohesive compensation plan that includes base salary, annual bonus, and long-term incentives:
- How do I compare to other companies in the industry?
- Should I have an annual plan in place?
- What should be the base, executive-level salary?
- Is my compensation plan competitive in my industry, my marketplace?
- How can I best retain my executive talent?
Using Life Insurance as an Executive Compensation Tool
The two most popular executive compensation options, both involve life insurance. These can provide benefits to key employees and your business.
Executive Bonus Agreements
In an executive bonus arrangement, you provide select employees, including yourself, extra income by purchasing financial products, such as life insurance, for them.<
Executive bonus arrangements offer the following advantages:
- The employer receives a current income tax deduction.
- The employees may use any cash values accumulated in the purchased products for retirement income or any other use.
- Any products purchased are owned by the employees and are paid for either directly by the business or through cash bonuses to the employees. These payments or cash bonuses are included in the employees' current taxable income.
- The arrangement may be structured to cover the income tax cost of the yearly bonus to the employees.
- The arrangement can be designed to provide "golden handcuffs," although doing so may impact the tax advantages.
A split-dollar arrangement* is when an employer and an employee agree to share the premium, death benefit, and cash value of a permanent life insurance policy.
There are a number of variations of split-dollar arrangements, but all offer these advantages:
- For the employee, the sharing of the payment of premiums may make it easier for him or her to obtain coverage.
- For the business, it allows for cost recovery and effectively functions as golden handcuffs because the employee is obligated to repay the business for the amount of premiums advanced.
This type of arrangement is particularly suited for those situations where you are seeking:
- Substantial additional benefits for selected employees accompanied by minimum current income tax to the employees.
- A high degree of employer control.
This benefit permits the participating employees to accumulate policy cash values on an income tax-deferred basis while providing a significant, generally income tax-free survivor benefit to a personal beneficiary.
Veracity Advisers is prepared to work with you and your tax and legal advisors to help create the programs that are appropriate for your company, your employees, and you.