What it is:

• For the executive … a plan for deferring income
• For the corporation … an executive incentive plan using life insurance which has reduced effect on its current cash flow and surplus account

How it works:

Advantages:

• Retain employer control of asset and plan
• No IRS approval needed
• May selectively favor one or more employees
• Low-cost fringe benefit using life insurance tax leverage
• Recruit new employees
• Retain older employees
• Accumulate tax free funds to pay benefits
• Possible cost recovery or gain to employer
• Defer current employee income taxes until benefit payout