Executive Compensation Plans

Financial Services

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.

Split-Dollar Arrangements

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.

Veracity Advisers is a division of Capital Markets IQ, LLC, a SEC registered investment advisor. 

© 2019 Veracity Advisers

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by Veracity Advisers, to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered personalized investment advice for compensation.