Section #162 refers to the tax code that allows a business owner to institute a non qualified plan for selected employees to earn a bonus.
In its simplest description an employee will purchase a life insurance policy to have the business fund the premiums which are now tax deductible and the employee has access to accumulated cash value within the the certificate or policy. There are no fiduciary or current reporting requirements or governmental approval requirements to administer a I.R.C. Section 162 Executive Bonus Plan. Policies for business owners or key employees are just like policies for individuals. The only difference is the beneficiary is a business instead of an individual. Many people consider their home to be their greatest asset when in fact your greatest asset is your life and health. Many of us tend to forget without either what our circumstances could be.
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INTENDED FOR EMPLOYERS;
Who want to offer employees the security and comfort owning life insurance.
Would like a way to provide employees additional income.
Want a recruiting tool, and who wish to stay competitive on compensation.
Are able to utilize the bonus deduction.
Need an easy discretionary way to bonus an employee
Can utilize the tax advantage of paying the premiums*.
*Employer payment of premiums are wages to the employee and subject to FICA and FUTA. An employer cannot take a deduction for premiums if the employer is named as a beneficiary of the life insurance contract