Executive Bonus Plans (162)
A simple, flexible way to provide deferred-comp-like benefits to key employees outside of qualified plans.
A bonus the employee can use—and the business can deduct.
Section 162 bonus plans (named after the IRS code section) let an employer pay the premium on a life insurance policy owned by a key employee. The employee owns the cash value, gets the death benefit, and the employer gets a tax deduction for the bonus.
Why owners use them
- Simpler than non-qualified deferred comp — no plan document, no rabbi trust, no top-hat filing
- Selective — only the people you choose participate
- Portable for the employee — the policy is theirs
- Tax-deductible to the business — assuming reasonable compensation rules are met
- A retention tool — combined with a vesting schedule (“double bonus”), it gives the employee a real reason to stay
Useful for partners, key salespeople, or family-business successors you want to reward without the rigidity of a qualified plan.
Let's see if we're a good fit.
A 30-minute introductory call—no pressure, no obligation. We'll talk through your goals and whether working together makes sense.