Executive Split Dollar Endorsement Plan

You can use business dollars to help with the purchase of personal life insurance with our Executive Split Dollar Endorsement Plan. This plan may work for you if you are a business owner who:

• Is looking for a cost-effective method of using business dollars to assist in the purchase of your personal life insurance coverage; or
• Is looking for a way to retain and reward selected executives by subsidizing the cost of permanent personal life insurance; and
• Has a business that is able to subsidize the purchase of the coverage, but you want the business to be reimbursed for its accumulated costs, as well as be able to maintain control over the policy and its cash values, and
• Has executives who have a need for personal life insurance coverage and who want to reduce their out-of-pocket cost and are willing to reimburse the business for some or all of its costs.

How the plan works
The business owns the policy and gives the executive the right to name the beneficiary of a portion of the death benefit. All of the policy cash value is generally owned by the business. The executive/insured acquires a pre-retirement death benefit at minimal cost. The business recovers its costs through policy cash values and/or death benefit proceeds.

Employer/Business Benefits

• Endorsement split dollar is a flexible benefit program that, if properly structured, is not encumbered by ERISA or nondiscrimination requirements.
• Executive retention is enhanced through an attractive benefit backed by a binding agreement. In  effect, the employer has “golden handcuffs” because the executive must sacrifice valuable benefits if he leaves the employer.
• Complete discretion is given to the employer as to which employees to include in a split dollar agreement.
• Business costs and participant benefits may be varied among participants, allowing for individually designed incentive programs that meet the needs of both the business and the executives.
• The employer, as the owner of the life insurance contract, controls the cash values subject to the terms of the split dollar agreement.
• The employer, as owner of the life insurance contract, has the flexibility upon retirement or termination of the executive to surrender the policy and receive cash value, retain the policy until the executive’s death, or sell the policy to the executive.
• The employer may recover its outlay, resulting in lower overall long-term costs.

Executive Benefits

• The executive is able to obtain the benefits of life insurance protection with little or no out-of-pocket cost during his/her working years.
• 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 following retirement, he or she can purchase the policy from the employer, or the employer can bonus the policy to reward the executive for his or her loyalty and service to the business.

Tax Considerations:
Premiums paid by the employer are not tax deductible, and no IRS approval is required. Life insurance death proceeds are generally received income tax free, however for so-called employer-owned contracts issued after August 17, 2006, death proceeds are subject to income tax. The tax treatment of an endorsement split dollar arrangement between an employer and executive depends on the date the split dollar arrangement is entered into and the structure of the agreement.  And, the employee is taxed on economic benefit while endorsement split dollar arrangement is in effect.

You should check with your account to understand all tax considerations that apply to your situation. And, like most insurance policies, our policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force.  Your licensed financial professional can provide you with costs and complete details.