20-221D 20-221D . . . Stock Bonus Plan Board of Directors has authority to determine which key employees shall be awarded stock bonuses, amounts of bonuses, number of shares of common stock to be awarded, and all other terms and provisions of each bonus. Bonus awards are based on attainment of specified types and combinations of performance measurement criteria, which may differ as to various employees
Alabama Executive Bonus Plan
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US-CC-20-221D
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FAQ
Bonus payments are tax-deductible by the business, but the employee must pay income tax on the benefit.
The employers' contribution to an executive bonus plan is considered salary to the executive and is therefore subject to taxation. Many employers provide for the taxes, aptly titled a Double-Bonus Executive Bonus Plan. The employer pays the premiums on a permanent life insurance policy owned by an employee.
Under a restricted executive bonus arrangement (REBA), the Employer uses tax-deductible bonuses to assist the Executive in purchasing a permanent life insurance policy on his or her own life. The Executive owns the policy and names the beneficiary.
REBA is a type of Section 162 executive bonus plan that acts as a ?golden handcuff? by restricting employee access to life insurance cash values for a period of time, thereby providing death benefit protection and an incentive for employees to remain with their employer. How does REBA work? Life insurance policy.
In some cases, they can be a more tax-efficient way to reward top talent. They give employees additional compensation with a lower current cost to the employer than some other types of benefits. And since they only apply to top-level employees, they're often a less expensive benefit for the employer to add.
When the employee reaches retirement age ? or sooner, depending on how the arrangement is set up ? they can access the cash value of the policy for extra income if they want. If the employee dies, the death benefit of the policy would go to their family or other named beneficiaries.
An Executive Bonus Plan, also referred to as Section 162 Plan, is a non-qualified plan used by employers to provide special compensation to key executives. The employers' contribution to an executive bonus plan is considered salary to the executive and is therefore subject to taxation.
