What are Executive benefits?
As a business owner, you need to recruit and retain key employees. At the same time, you must also deal with succession planning concerns. No matter the size of your company, the loss of a few key employees can have a devastating impact on not only your companies’ future but its very existence.
To stay ahead and plan long-term, many companies choose to offer a tailored executive benefits program to support and complement their leadership while remaining competitive. Read about some of the benefits recommended for executives below.
Nonqualified Deferred Compensation
For those who are maxed out with their 401(k) and HSA/IRA options but still want to save more for retirement or other goals, consider exploring a non-qualified deferred compensation plan (NQDC). An NQDC is similar to an IRA; however, it offers additional tax benefits that might be attractive if you’re looking into saving money sooner rather than later.
Executive Disability Income Insurance
In the event that a key employee becomes disabled, long-term disability (LTD) insurance provides a good foundation for protecting replacement income. However, many companies limit executive team members’ replacements incomes with coverage caps, leaving them vulnerable in case of disability or illness. For employers, this plan gives them a boost in retaining and recruiting top talent.
Split Dollar Life Insurance
The employee and employer agree to a split-dollar plan in which both will share the cost of their premium, cash-value account balance at retirement age, and final settlement with death benefits. The details are outlined for the long-term goals the employee needs to accomplish, how much time it’ll be active for, and how it will be terminated.
Key Person Insurance
When a key member of your business leaves or something happens, such as a death, it can cause businesses to lose revenue, productivity, or even close doors. This may not be something business owners want to plan for, but it is necessary to have a strategy in place. A company purchases a life insurance policy on its key employee(s), pays the premiums and becomes a beneficiary if they unexpectedly die. The company can use the insurance proceeds for expenses until it finds a replacement person or pays off debts.
A buy-sell agreement is there so that if an essential partner leaves your business, you will know how best to proceed with the operation and protect yourself from external forces trying to interfere like lawsuits due to unwanted change within the industry. They protect against the death or retirement of key members, allowing them to continue operating if something happens outside their control.
Executive Bonus Section 162 Plan
Benefits are usually in the form of a permanent life insurance policy that accrues cash value that can be used as the employee’s retirement income in the future. The cash value is tax-deferred, while the death benefit is free of taxes for a beneficiary. This plan offers businesses an opportunity to attract and retain critical executives by providing benefits to their employees and themselves financially since they can deduct these payments from income on their annual return forms.
Supplemental Executive Retirement Plan (SERP)
A SERP is a great way to keep your best employees around, and it also shows that you trust them. You promise retirement income or an immediate lump sum benefit if they stay with the company until their retirement day. This plan can provide disability and death benefits too. It’s often called “The golden handcuff” for a good reason.
Why Invest in Executive Benefits for Your Business?
Attract and Retain Top-tier Talent
Providing benefits to your employees is crucial because it can help you attract new talent. And as word spreads about the company, you will be more likely to find top-tier applicants, leading to their work even better!
Investing in your leadership team can be an excellent way to add tangible benefits for both the company and employees. Offering executive benefits will significantly reduce the likelihood of key employees looking for opportunities elsewhere and creates more loyal team members.
Provide Protection for Your Business
Executive benefits protect more than your key employees. They also protect the company and shareholders by covering the replacement, transition, and any financial obligations left from the loss of a key employee. This allows businesses to continue operating or make necessary arrangements without an overwhelming and possibly catastrophic financial impact.
Merritt Business Solutions provides business owners with an Executive Benefit Plan customized to their businesses needs. Contact us today to learn how you can get started with yours!