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Combined Retirement Plan | Self Directed IRA

The Combined Retirement Plan is three policies-in-one that provides funds for executive compensation arrangements.

If you are a business owner who:

• Has business loans that cannot be negotiated without your personal guarantee
• You rely on one or more executives for generating the bulk of the business revenue or for acquiring most of the company’s new customers
• You depend on a few key executives for the management of your business
• The business would be severely affected by the death of a key employee
• You desire to provide an incentive that will help retain key executives and have the cash flow necessary to fund the incentive program
• Your key executives have a strong need for death benefit protection for their families and also need to accumulate more funds for future retirement needs.

If so, you may want to consider combining the purchase of key person coverage with both a split dollar arrangement and a deferred compensation arrangement.

• A combination key person, split dollar, and deferred compensation arrangement:
• Allows the business to protect itself from the financial losses associated with a key executive’s death, and
• Is a cost-efficient way to meet an executive’s need for a pre-retirement death benefit and postretirement supplemental income with a single life insurance policy?

Benefits to the Business

• An incentive for executive retention is provided by an attractive benefit backed by a binding agreement.
• Complete discretion is given to the employer as to which employees to include.
• The employer effectively has “golden handcuffs” on the executive since the executive must sacrifice valuable benefits if he/she leaves the employer.
• The key person insurance coverage helps the business to protect itself from the losses it may suffer as a result of a key executive’s death.
• If properly structured, this is a flexible benefit program unencumbered by ERISA or nondiscrimination requirements.

• Individually designed incentive programs may be set up with benefits and costs designed to meet the unique needs of each executive and the business.
• The business benefits from cost efficiency because one policy is used to cover several needs. In addition, the arrangement can be structured to enable recovery of the employer’s cost at the insured’s death, resulting in lower overall costs.

Benefits to the Executive

• The key executive receives pre-retirement life insurance protection at a lower out-of- pocket cost than if purchased on an individual basis.
• While the split dollar agreement is in effect, the executive’s beneficiaries receive the protection provided by life insurance death benefit proceeds.
• If the executive requires death benefit coverage during retirement years, the policy can be purchased from the employer, or the employer can bonus the policy as a compensation reward for loyalty and service to the business. This provides protection against future insurability problems for the executive.
• The executive receives post retirement supplemental income as provided under the deferred compensation agreement entered into with the employer.
• Unlike qualified plans, no federal income tax penalties are imposed on deferred compensation benefits paid before age 59½.

Tax Considerations

No IRS approval is required for the arrangement, however there are specific reporting requirements that must be adhered to. Premiums paid to purchase the life insurance on the executive’s life to help fund the arrangement are not tax-deductible by the business. Each year the endorsement split dollar arrangement is in effect, the executive must report income equal to the “economic benefit” received less any amount the executive has contributed.