Secure Incentive Plan
A secure and tax-efficient alternative to non-qualified benefits
We recommend corporations evaluate the benefits delivered with a Secure Incentive Plan (SIP) in comparison to the administrative, accounting and compliance challenges of traditional non-qualified plans.
A SIP leverages a bonus or loan structure while allowing the executive participant to own 100% of their benefits. The simple and elegant structure provides the following benefits:
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Tax-deferred (or tax-free) cash accumulation for the participant
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Ownership of the asset for the participant (you are no longer an unsecured creditor with respect to your benefits)
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No administrative compliance with 409A or benefit accruals for the company
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Minimal earnings impact for the company
"Now is an excellent time to adopt a Secured Incentive Plan (SIP) for your key employees. Companies can provide tax-efficient benefits and keep the deduction on your contributions."
Darren Gallaway, Principal, TRC Financial
Leverage a SIP
Secure Incentive Plan
vs.
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No risk of forfeiture for your benefits.
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Tax-deferred or tax-free benefits to the participant.
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Control timing to receive retirement income.
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Tax-free death benefit to pre-fund retirement income for heirs.
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Tax-free long-term care benefits.
Non-Qualified Plan
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Risk of forfeiture for your benefits.
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Tax-deferred benefits to the participant (100% taxable for early termination).
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Limited control over the timing to receive retirement income.
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No death benefit to pre-fund retirement income for heirs.
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No long-term care benefits.
SIP Mechanics
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Executive (or trust) owns the life insurance policy
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Company pays the annual premiums through a collateral assignment split-dollar arrangement or bonus arrangement
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Long-term AFR interest rates are locked in for the benefit period (loan designs)
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Tax-deferred (or tax-free) growth of the asset with a death benefit and long-term care benefits if needed
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