Life Insurance Sales: Portion 162 Executive Reward Strategies

Are You Selling To Small Business Corporations?

There’s a massive market for life insurance sales to small business homeowners with “C” company standing – or LLCs filing as “C” firms.

It is really exhibiting them how to use tax-deductible company pounds to fund tax-totally free retirement income for only the business operator himself – and if they pick out, a number of of their important people today as effectively.

Mainly because several compact businesses have set up 401k programs for all their workers.

But the “prime-hefty” guidelines, strictly limit the “very compensated” staff to how substantially they can lead – based on what the “non-very compensated” employees lead.

So most of these organizations can find the money for and want to contribute much more than these designs enable for the benefit of their really compensated executives – even if it’s only the proprietor.

And due to the fact 401k strategies have turn out to be the predominant certified retirement plan for organizations of all measurements – the industry is rather wide AND untapped.

But these sales are not sophisticated, or dependent on legal documentation, or subject to ERISA.

In fact, they’re very uncomplicated, and can be mounted quite effortlessly.

They are known as a “162” Reward strategies – referencing area 162 of the Internal Revenue Code.

Which essentially stipulates that bonus payment is tax-deductible as a business expense – and that any this kind of bonus payment can be selective and discriminatory.

Which means that it can be paid out only to usually very compensated employees (i.e. executives).

That’s why they are generally referred to as “Executive Reward” plans.

Here is How It Works:

The owner or executive owns the plan, but the corporation cash it with a tax-deductible reward – paid immediately into the deal yearly or quarterly.

And that reward income is taxable to the executive for the calendar year in which it goes into the deal.

Even so, 100% of the development on that revenue (just about every 12 months thereafter), and 100% of all the money withdrawn throughout retirement can all be tax-absolutely free.

Which suggests that the owner or executive only pays tax on the money likely in – but NOT on any of the cash coming out – which can be two or even a few periods as a lot.

That is Why It Will make Feeling.

Simply because taxation on the bonus is a relatively smaller concession to acknowledge – in exchange for not needing to include things like ALL the other workforce, and for the means to withdraw all the development tax-absolutely free.

Life Insurance Sales with Equity Index UL

Executive Reward plans perform most effective working with Equity Index UL procedures (with favorable loan provisions) for obvious factors:

1) an index like the S&P 500 can simulate a 401k portfolio – but devoid of any market losses

2) cash value mortgage provisions beneath code segment 7702 enable tax-free of charge retirement cash flow

3) the insurance agreement itself is all that is needed to present the positive aspects

4) these contracts are inherently adjustable and can be effortlessly modified from 12 months to yr

5) plan layout can be personalized for every executive with a variety of riders