Executive Bonus Program
INDIVIDUAL DISABILITY INCOME INSURANCE
Quick Facts:
Discounted DI for Key Employees Executive Bonus Program
In this program, a business deducts premiums from select employees’ salary to pay premiums for IDI coverage, providing the business with a tax deduction. The business then pays a bonus to the employee to cover the deducted amount. Use when business owner’s objective is What the program does
To reward key employees • Provides company-paid additional income protection for key employees should sickness or injury prevent them from working • Enables key employees to cover a higher percentage of their income including bonuses and retirement contributions • Provides the business with a tax-deductible expense for bonus paid
Why the program is needed
Allows business owners to attract and retain key employees by offering individual disability coverage at no cost to the employee. Even if the firm has a group LTD plan, key employees may not have adequate disability income protection if they: • Are paid incentive compensation or commissions • Receive compensation that exceeds the group LTD plan cap • Make retirement plan contributions
Which types of businesses can implement
Any business including LLCs, sole proprietorships, partnerships, C corps and S corps
Who can participate
Select employees of the employer’s choosing
Coverage paid for by
The business
Tax treatment of premiums
• Business deducts premiums from employee’s earnings but pays the employee to cover the cost; the bonus paid by the employer may be tax-deductible • Bonus is included in the employee’s taxable income
Tax treatment of benefits received
Benefits to employee are tax-free
Benefits for the business or practice
• Business can reward select employees with valuable coverage to reward loyalty and improve retention. • Bonus paid by the business or practice to the employee to cover premiums may be tax deductible. • Program is easy to set up. • Permanent 25% discount on premiums when there are three or more participants.
Benefits for the employee
• Opportunity to have a greater portion of their income covered by the employer with industryleading IDI protection. • Disability benefits received would be tax-free. • Premiums deducted from employee pay are reimbursed by the employer in the form of a bonus. • Employee can receive both the insurance premium plus the employee’s tax due on the bonus from the employer.
Discount/Other program information
• Permanent 25% discount on premiums with three or more qualifying participants* • Full financial and medical underwriting on covered employees • Unisex rates (level or graded)
Policy form
Provider Choice policy form 18UD. (If 18UD is not approved in state, then ProVider Plus policy form 1500.)
Continued…
The Guardian Life Insurance Company of America New York, NY 10004-4025 For Producer use only. Not for use with the general public.
Implementation
• Business authorizes a plan with a corporate resolution using our sample documents • Firm determines – Which key employees will be included – Amounts to be given • Business purchases individual disability income insurance policies on behalf of the participating employees and deducts premium from employees’ pay • Value of the premium is included in the employee’s taxable income statement (W-2) • Questions? Contact [email protected]
The 3 lives must be issued within a 6-month period from discount program approval. Those in-force policies that are not eligible for the discount but then subsequently qualify within the 6-month timeframe will be handled as terminate-and-replace cases. The current date and attained age will be used. Additional details can be found in the Product Manual, Pub7493BL, Administrative Practices section (In-Force Policy Replacements). The Product Manual for policy form 1500 is 6502. *
Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of and administrator for The Guardian Life Insurance Company of America, New York, NY. Product provisions and availability may vary by state. This flyer is provided for informational purposes only and should not be considered tax or legal advice. Your client should consult his or her tax, legal, or accounting professional regarding his or her individual situation.
Pub 5870BL (06/16) 2016-22509 (Exp. 06/18)
The Guardian Life Insurance Company of America New York, NY 10004-4025 For Producer use only. Not for use with the general public.
Quick Facts:
Discounted DI for Key Employees Executive Bonus Program
In this program, a business deducts premiums from select employees’ salary to pay premiums for IDI coverage, providing the business with a tax deduction. The business then pays a bonus to the employee to cover the deducted amount. Use when business owner’s objective is What the program does
To reward key employees • Provides company-paid additional income protection for key employees should sickness or injury prevent them from working • Enables key employees to cover a higher percentage of their income including bonuses and retirement contributions • Provides the business with a tax-deductible expense for bonus paid
Why the program is needed
Allows business owners to attract and retain key employees by offering individual disability coverage at no cost to the employee. Even if the firm has a group LTD plan, key employees may not have adequate disability income protection if they: • Are paid incentive compensation or commissions • Receive compensation that exceeds the group LTD plan cap • Make retirement plan contributions
Which types of businesses can implement
Any business including LLCs, sole proprietorships, partnerships, C corps and S corps
Who can participate
Select employees of the employer’s choosing
Coverage paid for by
The business
Tax treatment of premiums
• Business deducts premiums from employee’s earnings but pays the employee to cover the cost; the bonus paid by the employer may be tax-deductible • Bonus is included in the employee’s taxable income
Tax treatment of benefits received
Benefits to employee are tax-free
Benefits for the business or practice
• Business can reward select employees with valuable coverage to reward loyalty and improve retention. • Bonus paid by the business or practice to the employee to cover premiums may be tax deductible. • Program is easy to set up. • Permanent 25% discount on premiums when there are three or more participants.
Benefits for the employee
• Opportunity to have a greater portion of their income covered by the employer with industryleading IDI protection. • Disability benefits received would be tax-free. • Premiums deducted from employee pay are reimbursed by the employer in the form of a bonus. • Employee can receive both the insurance premium plus the employee’s tax due on the bonus from the employer.
Discount/Other program information
• Permanent 25% discount on premiums with three or more qualifying participants* • Full financial and medical underwriting on covered employees • Unisex rates (level or graded)
Policy form
Provider Choice policy form 18UD. (If 18UD is not approved in state, then ProVider Plus policy form 1500.)
Continued…
The Guardian Life Insurance Company of America New York, NY 10004-4025 For Producer use only. Not for use with the general public.
Implementation
• Business authorizes a plan with a corporate resolution using our sample documents • Firm determines – Which key employees will be included – Amounts to be given • Business purchases individual disability income insurance policies on behalf of the participating employees and deducts premium from employees’ pay • Value of the premium is included in the employee’s taxable income statement (W-2) • Questions? Contact [email protected]
The 3 lives must be issued within a 6-month period from discount program approval. Those in-force policies that are not eligible for the discount but then subsequently qualify within the 6-month timeframe will be handled as terminate-and-replace cases. The current date and attained age will be used. Additional details can be found in the Product Manual, Pub7493BL, Administrative Practices section (In-Force Policy Replacements). The Product Manual for policy form 1500 is 6502. *
Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of and administrator for The Guardian Life Insurance Company of America, New York, NY. Product provisions and availability may vary by state. This flyer is provided for informational purposes only and should not be considered tax or legal advice. Your client should consult his or her tax, legal, or accounting professional regarding his or her individual situation.
Pub 5870BL (06/16) 2016-22509 (Exp. 06/18)
The Guardian Life Insurance Company of America New York, NY 10004-4025 For Producer use only. Not for use with the general public.
