Section 162 Plans are benefit agreements between key employees and their employer.  These plans provide an exclusive employee benefit that can create an added supplemental retirement income stream and a death benefit for the employee.

Named after the IRS Code Section 162, Section 162 Plans provide a great way to retain, reward, and recruit key employees and top talent as a “Golden Handcuff” type of benefit.

Basic 162 Plan Structure

1. Company Agrees to Pay Premium for Life Insurance Policy on a Key Employee (with vesting restrictions)
2. Employee Reports Paid Premiums as Income (typically, the employer will “double bonus” the participant to cover the imputed income and associated taxes (hence, the “Double Bonus” Plan alternative description))
3. Over the Years (as premiums are paid), Cash Value in the Policy Accumulates
4. Employee (as subject to vesting schedule) retains rights to the Cash Value in the Life Insurance Plan and the Death Benefit

Benefits for the Company

• Simple
• • No IRS Restrictions (follows Section 162 Guidelines)
  • No Government Forms / Administration
• Cost-Effective
• • Premiums (“bonus”) are Tax-Deductible
  • Minimal Administrative Costs
• Exclusive
• • No Participation / Eligibility Requirements
  • Selective (Company chooses who Receives Benefit)
• Flexible
  • Each Section 162 Plan Customized to Each Employee
• Reward / Retention / Recruiting Tool
• • Provides “Golden Handcuff” Incentive

Benefits for the Participant

• Protection
• • Participant Adds Life Protection via the Death Benefit
• Supplemental Retirement Income
• • Tax-Deferred Growth of Policy’s Cash Value
  • Extra Cash Value in the Life Insurance Policy can provide a Tax-Free Retirement Income Stream*
• Portability
• • Participant Retains Policy Rights (depending upon agreed vesting schedule)

Contact Us to Get More Information and See How a Section 162 Plan could be of Benefit to You.

*Please note, all concepts, strategies, and products mentioned may not be suitable for you or your company. Information provided is not intended to be legal or tax advice.  Tax-free retirement income provided via policy loans and withdrawals.  Certain limitations may apply to withdrawals and policy loans/withdrawals will reduce the death benefit/cash value and may be taxable under certain circumstances.  Please consult with your tax and legal advisor for specific tax questions.