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Business & Executive Benefits

Whether you are a business owner seeking to protect your business, provide employee benefits and preserve them for the future, or an executive who wants to create, protect and preserve wealth for their family, our team of professionals can provide the tools and strategies necessary to help you plan your financial future.

Let us assist you in erasing any concerns you may have about the future of your business with a comprehensive financial strategy to address employee benefits, business succession, as well as key executive protection and bonus plans.

  • Non-Qualified Deferred Compensation Plan
  • Buy & Sell Agreements
  • Key Talent Insurance
  • Split Dollar Arrangements
  • Executive Bonuses

Non-Qualified Deferred Compensation Plan

Taxation under the Internal Revenue Code (IRC) and the Puerto Rico Revenue Code (PRRC) is the most significant difference between a qualified and non-qualified plan.  To be able to maximize the financials of your company, the company should be able to deduct all qualifying expenses.

A non-qualified plan is a type of tax-deferred, employer-sponsored retirement plan that falls outside of Employee Retirement Income Security Act (ERISA) guidelines. Non-qualified plans are designed to meet specialized retirement needs for key executives and other select employees. These plans also are exempt from the discriminatory and top-heavy testing that qualified plans are subject to. The contributions made to these plans are usually nondeductible to the employer, and are usually taxable to the employee as well. However, they allow employees to defer taxes until retirement when they are presumably in a lower tax bracket. Non-qualified plans are often used to provide specialized forms of compensation to key executives or employees in lieu of making them partners or part owners in the company or corporation.


Buy & Sell Agreements

A buy and sell agreement is an approach used by sole proprietorship, partnerships and closed corporations to divide the business share or interest of a proprietor, partner, or shareholder. The owner of the business interest being considered has to be disabled, deceased, retired or expressed interest in selling. The buy and sell agreement requires that the business share is sold according to a predetermined formula to the company or the remaining members of the business. Before the interest of a deceased partner can be sold to the company or remaining partners, the deceased's estate must agree to sell. 

In order to ensure the availability of funds in the event of a partner's death, most parties will purchase life insurance policies on the other partners. In the event of a death, the proceeds from the life insurance policy are used to purchase a portion of the deceased's business interest. It is important to note that when a sole proprietor dies, since he/she has no partners, a key employee is the buyer or successor.

Cross-Purchased Agreement

A document that allows a company's partners or other shareholders  to purchase the interest or shares of a partner who is deceased, incapacitated or retiring. A cross-purchase agreement is used in business continuation planning. The document outlines how the shares can be divided or purchased by the remaining partners, such as a proportional distribution according to each partner's stake in the company.

Because a cross-purchase agreement may result in shares becoming unexpectedly available (e.g. in the event of a partner's death), a partner will likely take out life insurance policies on the other partners and list himself as the beneficiary. If one of the partners dies, the funds from the life insurance policy  can be used to buy the deceased's interest. Some cross-purchase agreements use a dollar amount to calculate the buyout  price, while others use a formula.


Entity-Purchase Agreement

A type of business succession plan that is used by companies that have more than one owner. The plan involves having the company take out an insurance policy on the lives of owners in the amount equal to each owner's interest. In the event of death, the amount collected by the company from the insurance, which is equal to the deceased owners stake, is used to pay the deceased's estate for its share of the business.

The advantage of this type of succession plan is that the owners know their respective stakes in the company will be paid out to their estates, and that the company will continue to be run by the other partners. Having this type of succession plan, (which is paid for by the company) allows the owners to avoid any out-of-pocket expenses while also looking after their families in the event of death.

Key Person Insurance

A life insurance policy that a company purchases on a key executive's life. The company is the beneficiary of the plan and pays the insurance policy premiums.

Also known as "key person insurance.”

Key person insurance is needed if the sudden loss of a key executive would have a large negative effect on the company's operations. The payout  provided from the death of the executive essentially buys the company time to find a new person or to implement other strategies to save the business.

Split Dollar Arrangements

In many instances it is beneficial to a business or corporation to help an employee purchase life insurance. The policy can be used as an incentive or as a form of deferred compensation. A split-dollar life insurance policy can be beneficial to both the employer and the employee. It is an arrangement between two parties, usually an employer and employee in which they share and split the policy. The policy can be shared and split in several ways... 

  • Cash values
  • Premiums
  • Death Benefits
  • Ownership
  • Dividends

Advantages 
A spit-dollar arrangement can benefit both interested parties. Overall the advantages of the arrangement to the employer are... 

  • The employer can provide low cost benefits to it's employees
  • The portion of the premiums paid by the employer for the benefit of the employee can be deducted for tax purposes by the employer
  • The employer will receive the total of all premiums paid on behalf of the employee upon the employee's death
  • The plan can be designed so that the employer retains complete flexibility. In other words, the employer can modify or terminate the arrangement at their option.
  • The arrangement can be used as an incentive to the employee

The advantages to the employee are... 

  • Able to obtain life insurance cheaper. In other words, splitting the cost of the premiums allows employees to obtain better coverage at less cost.
  • The employee can protect his/her family in the event of their untimely death
  • When an employer pays the premiums the employee may be able to reduce their income tax liability (if the employee is in a higher tax bracket).
  • Can provide for estate liquidity in the event of the employees death

Executive Bonus

Executive bonus plans are straightforward. An executive is issued a life insurance policy with premiums paid by the employer as a bonus to the executive. Premium payments are considered compensation and are deductible to the employer. The bonus payments are taxable to the executive. In some cases, the employer may pay a bonus in excess of the premium amount to cover the executive’s taxes.

HOW WE CAN HELP?

Using our Team Approach, we are ready to develop:

  • Executive Benefits Plans
  • Business Succession Planning
  • Qualified Retirement Plans
  • 401(k), 1165(e), and Keogh Plans & Administration
  • Key Talent Protection Plans
  • Profit Sharing Plan
  • Risk Management Strategies
  • General Insurance
  • Group Employee
  • Group Employee Benefits Plan (Group Life, Group LTD, Group Health)
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