All employers have retention on the mind, but few are zeroing in on a specific talent group — high-level executives. These individuals are integral to the success of your organization, and they play an essential role in shaping the company from the top down. Now more than ever, employers must ensure that their benefits offerings contain the perks that executives want, especially since traditional 401(k)s restrict the amount of money an individual can contribute on a tax-favored basis.
In this article, we explore some executive benefits that can be equally advantageous for both your top talent and your organization.
Non-qualified Deferred Compensation Plans
With non-qualified deferred compensation plans, executives can choose to defer some of their compensation, either salary or bonuses, until retirement. Employers can offer supplemental executive retirement plans (SERPs) which provide additional funding for a defined benefit or defined contribution plan for top executives.
So, what makes these plans advantageous? Well, no taxes are due on the money placed in these plans until it is received by the executives, and they can be incorporated into your current qualified plan, making adoption seamless. In addition, these plans avoid IRS requirements for qualified plans and require minimal ERISA compliance.
Non-qualified deferred compensation plans pay out in a variety of circumstances, including to an executive’s spouse in the event of an executive’s death before retirement or to the executive in the event of disability. They can also be informally funded with life insurance policies and aid in the cost recovery through the income tax-free death benefit.
Executive Bonus Plans
With an executive bonus plan, employees purchase a permanent life insurance policy and then employers provide the premium as a bonus. This is considered taxable income and is tax-deductible for employers, making it a mutually beneficial offering to add to your executive benefits plan.
Employees control the policy (including death benefits and cash value) and can take loans or withdrawals on the policy as they see fit. In the event of an executive’s death, their family receives the death benefit.
Split Dollar Plans
If you want to grant your executives the ability to purchase life insurance coverage without paying the premiums, consider incorporating split dollar plans into your offerings. With this plan, the payment responsibility rests on you, the employer. In return, you receive back the amount of the premiums after the executive’s death.
Supplemental Disability Income Insurance
A typical group long-term disability policy provides 60% of an employee’s income, up to the allotted maximum amount. For executives, the maximum benefit may not reach 50% of their salary, which would be insufficient in the event of disability.
Employers can purchase individual supplemental disability income insurance to bring the executive’s total benefit up to the same level as other employees. This can exemplify to your executives that you value what they bring to the table and acknowledge that they deserve adequate long-term disability benefits.
While not exhaustive, these executive benefits selections can take your offerings to the next level and help your organization stand out among the competition in the fight for top talent. If you’re seeking tailored benefits guidance, connect with our team of experts at CBIZ Employee Benefits. To speak with a life insurance specialist, contact us here.