News

B & L Financial Architects News

Web Site: http://www.blfinarc.com/
85 Felt Road, Suite 601, South Windsor, CT 06074
Tel: (860) 432-9119 Fax: (860) 432-9092

Focus on Retirement Planning and Long Term Care Program Preserving Retirement Income.

View all News Articles for B & L Financial Architects

HELP WANTED: How To Attract and Retain Potential & Current Key Employees

June 27, 2022

This results in their basic objectives: (1) What can a business offer me for my future while contributing to their growth. (2) What type of plans will attract new employees for a growth business. (3) How can key employees be rewarded for their value to stay with my company. As the economy improves, employee talent is at a premium. There are employee benefit plans that can create competitive features to attract and retain key employees. Use the enclosed link for information and potential solutions.

Plans can be customized to help both the Employer and Employee accomplish their financial objectives. These plans are generally employer funded bonuses that make sense; While the Employee receives the bonus payments as taxable income, The Employer can take the deduction for the payments. These plans are subject to less complex tax rules and ERISA regulations Such a plan as the 162 Bonus Plan is an arrangement where the employer funds the employee's purchase through payments of bonuses to the employee. The employee purchases the life insurance and selects the beneficiary. The employer never owns any interest in the policy.

What are the Benefits: Potential Employer Benefits: Employer can deduct for bonus payments under the plan as paid compensation. Ease of implementation and administer, compared to other non- qualified plans. Employer has flexibility to select the covered employee(s), amount and duration. No IRS consent required to implement or terminate. Retention: Employer can impose terms to incentivize the Employee to remain with the company. Key employee is the sole owner of the plan asset.

Potential Key Employee Benefits: The key employee has sole ownership of the asset during and after employment. The income tax impact on the employee can be minimized based on the bonus payment structure. The plan can be selected on needs of the individual employee.

If an Employer is considering implementation of a 162 Bonus Plan, the following considerations should provide further understanding. Determine amount of bonus and tax impact to both Employer and Employee. Document the purpose and benefits to the company and the total employee compensation. Document an agreement between the Employer and Employee along with any restrictions for the employee to remain eligible for the bonus plan. Consult with tax and legal advisors.

Example: (A) Owner (B) Key Employee (A) is an owner of an LLC with 5 employees. His key manager (B) is 55 with the company for 15 years and wants to have a plan to retain (B) for the next 10 years. (A) decides that a 162 bonus can be of value for both (A) as well (B). (A) provides bonus payments for (B's) benefit. (B) uses the bonus to purchase a long-term care plan for himself and his wife. (B) is taxed on part of the total premium, while the company expenses the bonus. (B) retires at 65 with a paid-up plan that will pay an income tax free benefit for his care and his wife for their lifetime (that the company has funded). Note: (A) realized the value and established a similar plan for himself and his wife.

There are other benefits available that can be designed to meet the specific objectives to attract and/or retain Key Employees.

For a more detailed discussion of the various plans that could benefit your business and personal financial objectives, please contact: John L. Carbone, CLTC� B&L Financial Architects (203) 509-4349 JCarbone@blfinarc.com

Neither B&L Financial Architects nor their representatives provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor.

Member News is provided as a service of the Midstate Chamber of Commerce and is also featured in the monthly "Chamber News" newsletter mailed to members.