Employee Benefits and Insurance Information

Business Owner Health Insurance Benefits Click on the heading below to expand each topic. Here you will find info on Life Insurance, Health Insurance, Dental Insurance, Accident Insurance, Cancer Insurance, Critical Insurance Insurance, and Illness Insurance. Within each category is detailed information about the services offered for each. Get all the information you need to make informed decisions about your insurance coverage.

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Deferred Compensation Plans

Deferred Compensation Insurance Benefits

Deferred Compensation Plans

Deferred Compensation Plans A deferred compensation plan is an arrangement whereby an employee or business owner defers some portion of their current income until a specified future date. Wages earned in one period are actually paid at a later date.

Life insurance can be used to fund a deferred compensation plan. The deferred amounts can be used to pay premiums on cash value life insurance. The cash value can then be available at retirement to supplement other income or, if the insured dies before retirement, the insured’s designated beneficiary would receive the insurance policy’s death benefit.

There are both qualified and nonqualified deferred compensation plans. A qualified plan receives certain tax preferences under the Internal Revenue Code. For starters the employer is entitled to a tax deduction for the amounts contributed to the plan. The benefits grow on a tax deferred basis until they are actually paid under the plan. Also, distributions are generally eligible for rollover to an IRA or other qualified plan, thereby permitting further tax deferral. Employers should have an IRS ruling regarding the tax status of a qualified plan.

The disadvantages of a qualified plan are that the nondiscrimination requirements prohibit an employer from providing benefits for highly compensated employees to the exclusion of other employees. This obviously comes into play when the employer has a family member or a special relationship that they would like to favor. The amount of the employer’s contributions are limited and their are regular reporting requirements.

A nonqualified plan does not receive favorable tax treatment. The employer is not entitled to tax deductions until such time as the benefits are actually paid to the employee under the doctrine of constructive receipt. The benefits are taxable to the employee at such time as the employee has the right to receive the benefits without regard to when the benefits are actually paid. The taxpayer does not actually have to take possession of the funds.

The advantages of a nonqualified plan allow the employer to pick and choose among the recipient employees without regard to years of service, salary level or any other criteria.

Another advantage is it allows a business to provide benefits to officers, executives and other highly paid employees. In addition, the amounts of the employer’s contributions are not limited. A nonqualified plan is less expensive to set-up than a qualified plan

and there are no significant filing or reporting requirements. There are special timing rules related to FICA taxes and income taxes to be aware of.

Any agreements and insurance policies within a business must be integrated with the overall plan and objectives of the business. Careful consideration must be given to the selection of the plan which is right for your business and to the method of funding your plan.

Key Person Insurance

Key Person Insurance Benefits

Key Person Insurance

Key Person Insurance , also known as key employee or key person insurance, is a life insurance policy used to protect a business from the death of a key employee. Key person insurance is most often used in small–to–medium–sized businesses where the death of a key employee could severely affect the stability or profitability of the company. Many companies do not survive the death of a key employee because the knowledge, skills, contacts, or business relationships of the key person are so hard to replace. A key person life insurance policy will give your company the buffer it needs to survive the death of a key man. If the death of you or any of your employees could cripple your company to the point of failure, then a key man insurance policy is something you should seriously consider.

Buy-Sell Agreements

Buy-Sell Agreements

Buy-Sell Agreements

Buy-Sell Agreements Most business partnerships start with the best intentions, but not every partnership ends that way. That’s why buy-sell agreements are so important. A buy-sell agreement is a contract between business partners that dictates who can buy a departing partner’s share of the business and establishes a fair price for the partner’s stake. The agreement also describes how to determine a company’s value if all the owners decide to sell.

Partner Buyout

Partner Buyout Insurance

Partner Buyout

Partner Buyout covers a potential sale or buyback situation when a partner leaves a business. The agreement may specify to whom a departing partner can sell (usually they must sell to someone else in the business), and it also sets a fair price for their share of the business. This protects the remaining partners by guaranteeing that the departing partner will sell their share to a suitable owner, and it protects departing partners by assuring them a fair price for their shares of the business.

Business Buyout
Business Overhead Expense Insurance

Business Overhead Insurance Benefits

Business Overhead Expense Insurance

Business Overhead Expense Insurance: How long would your business survive if you were temporarily disabled? How would you pay the salaries of your employees and meet your monthly expense obligations? Some statistics would have you believe at least 50% of persons aged 35 will suffer a disability lasting at least 90 days before they attain the age of 65.

When a disability occurs, generally three things are sure to happen to a business owner:
• their regular living expenses will continue to occur;
• business expenses will continue to occur; and,
• at this most inopportune time, the income earned from the business will be severely interrupted.

Business overhead expense (BOE) insurance is designed to reimburse a business for overhead expenses in the event a business owner becomes disabled. This is not the same as personal disability insurance which usually pays benefits to age 65. A business overhead expense policy pays a shorter benefit of one to two years after a waiting (elimination) period. It is generally considered that no business can stay open more than two years if the owner is disabled and the business will either be shut-down or sold.

These policies also work where there is more than one owner. If there is a business partner each partner can take out a policy to accommodate their share of the expenses.

The premiums paid for the business overhead expense insurance is a legitimate, tax-deductible business expense; however, the benefits are treated as taxable income when paid.

Generally, there are two conditions which must be met to trigger the payment of benefits:
• total disability due to injury or sickness must be present and
• the expenses covered by the policy must be incurred during the disability.

Typically, eligible business overhead expenses are:
• employee salaries
• employment taxes
• employee benefit costs
• rental payments for property and equipment
• principal and interest on mortgaged business property
• utilities
• accounting and legal fees
• business insurance expenses
• interest on business debts
• property taxes
• general office supplies

Any agreements and insurance policies within a business must be integrated with the overall plan and objectives of the business. Careful consideration must be given to the selection of the plan which is right for your business and to the method of funding your plan.