Controlled Executive Bonus Plans: Retain Key Employees with Strategic Benefits

For insurance producers, Controlled Executive Bonus Plans (CEBPs), also known as Section 162 Plans or Restrictive Executive Bonus Plans, represent a significant opportunity to address the unique needs of business owners and key employees. These plans provide a tailored solution for employers seeking to reward and retain top talent while simultaneously offering employees long-term financial security.

By identifying potential clients and illustrating how your insurance products solve their challenges, you can create value-driven sales opportunities within your network.

Recognizing the Opportunity

Look for these key client profiles in your network:

1. Business Owners: Especially those with growing enterprises who need to retain top talent in leadership or critical roles.
2. High-Income Earners: Individuals looking for tax-advantaged strategies to supplement their retirement and provide financial security for their families.
3. Competitive Industries: Businesses in sectors with high turnover or aggressive recruitment competition.

Ask clients these questions to uncover needs:

• Do you want a strategy to retain key employees while aligning their interests with your company goals?
• Are you concerned about losing talent to competitors?
• Would you benefit from a plan that incentivizes employee loyalty while offering immediate tax advantages?

How CEBPs Solve Client Challenges

1. For Employers

   • Problem: Struggling to retain top performers in a competitive hiring environment.

   • Solution: A CEBP acts as “golden handcuffs,” tying long-term financial rewards to employee tenure or performance.

   • Product Fit: A permanent life insurance policy funded by the employer offers a bonus tied to the employee’s ongoing contribution.

   • Problem: Seeking tax-deductible compensation options.

   • Solution: Premiums paid under a CEBP are tax-deductible for the employer, creating an immediate financial incentive to implement the plan.

2. For Employees

   • Problem: Lack of financial security for their families in case of death or long-term care needs.

   • Solution: The life insurance component provides income-tax-free benefits to beneficiaries and optional long-term care riders for added protection.

   • Problem: Limited retirement savings options or tax-deferred growth.

   • Solution: Policy cash values grow tax-deferred, offering a supplemental income source through loans or withdrawals after the restricted period.

How to Present the Plan to Prospects

1. Educate Employers on Retention Strategies:

   • Explain how CEBPs allow them to reward employees selectively without the administrative burden of government-regulated plans.
   • Highlight the ability to recoup premiums if an employee leaves prematurely, ensuring a low-risk investment in employee loyalty.

2. Show Employees the Personal Benefits:

   • Emphasize the ownership of the policy and its values after the restrictive period ends.
   • Discuss the tax advantages and potential for supplemental retirement income.

3. Tailor the Solution:

   • Work with clients to determine the optimal restrictive period and conditions based on the business’s goals.
   • Incorporate riders, such as long-term care benefits, to address broader needs.

Practical Steps for Producers

1. Audit Your Network: Identify business owners and executives in your existing client base.
2. Position the Plan as a Dual Benefit:
   • Highlight employer advantages (tax deductions, employee retention).
   • Showcase employee incentives (financial security, control over assets).
3. Use Case Studies: Share success stories of similar businesses using CEBPs to retain top talent.
4. Collaborate with Financial Planners: Partner with professionals who can identify additional prospects in need of executive compensation strategies.

By leveraging Controlled Executive Bonus Plans, insurance producers can offer a comprehensive solution that bridges the gap between employer needs and employee goals. This strategy not only enhances your client’s business but also positions your products as indispensable tools in solving real-world challenges.