Executive Benefits and Retention Strategies
Executive benefits are employer sponsored arrangements that use life insurance and supplemental benefits to attract, retain, and reward key talent, filling gaps that standard benefit plans may not address for highly compensated employees.
Beyond Standard Group Benefits
Standard group benefit plans have caps that often leave executives with less protection relative to their income than the rest of the workforce. Executive benefit arrangements use life insurance and supplemental structures to close that gap, providing benefits that are meaningful to highly compensated employees.
These arrangements can also serve retention purposes, tying benefits to continued service in ways that encourage key people to stay.
Executive Life Insurance Arrangements
Executive life insurance can take several forms, including split dollar arrangements, supplemental executive retirement plans, and other structures, where the employer and the executive share in the costs and benefits according to the arrangement's terms.
The design depends on the objectives: is the goal supplemental death benefit, supplemental retirement income, retention, or a combination? The right structure follows from what the employer is trying to accomplish.
Retention Considerations
Retaining key talent is a central concern for businesses that depend on specialized leadership. Benefit arrangements that vest over time, or that reward continued service, can support retention by giving executives a financial reason to stay.
These arrangements are most effective when they are part of a broader compensation and retention strategy rather than a standalone solution.
Plan Design and Tax Treatment Depend on the Arrangement
The tax treatment of executive benefit arrangements varies considerably depending on the structure, who pays, who benefits, and how the arrangement is documented. Some arrangements create taxable income, some involve reportable benefits, and some have specific compliance requirements.
We do not detail specific tax outcomes here, because they depend on the arrangement. Plan design and tax treatment should be confirmed with qualified tax and legal counsel for any structure under consideration.
Our Approach
We help design executive benefit arrangements that serve the employer's retention and compensation objectives, then coordinate with your accountant and attorney on the tax and legal structure. The goal is an arrangement that attracts and retains the right talent while fitting the business's budget and compliance needs.