Your trade and professional-practice clients are competing hard for skilled people. A key-employee bonus plan gives them a way to reward selected employees with a deductible bonus that funds a life insurance policy the employee owns, tied to a vesting schedule. We handle the insurance side and work alongside you on the numbers.
Where it fits in your client base
The strongest fit is a non-owner key employee of an S corporation, partnership or LLC, or an owner or employee of a C corporation. For owners of pass-through entities, a bonus to themselves is largely a wash. The plan does not need to cover all employees and has no IRS approval step; the bonus must be reasonable compensation.
What we provide
An illustrator for client meetings
You enter the premium and the rates; it shows the bonus, the employee’s taxes, the optional gross-up and the business’s cost after the deduction. It never supplies a tax rate or projects policy returns.
| Total bonus paid to the employee | |
|---|---|
| Of which pays the policy premium | |
| Employee’s taxes on the bonus | |
| Employee’s out-of-pocket cost | |
| Business’s cost before its deduction (bonus + payroll tax) | |
| Estimated value of the business’s deduction | |
| Business’s estimated cost after the deduction |
Cash-flow arithmetic only, using the rates entered above. This is not tax or legal advice. A bonus is deductible only as reasonable compensation, and the plan usually benefits key employees of S corporations, partnerships and LLCs who are not owners, and owners or employees of C corporations. Owners of pass-through businesses generally see little benefit for their own coverage. Any vesting or access restrictions belong in a separate written agreement drafted by the business’s attorney. Confirm the treatment with the business’s CPA. No policy values or projected returns are shown.
Policy design across multiple carriers
We compare permanent policies from multiple carriers, show the costs and the assumptions behind any illustration, and set the premium to fit the bonus the client chooses.
Coordination with the client’s attorney
The vesting restrictions belong in a written agreement drafted by the client’s attorney. We provide the policy details the attorney needs.
How we work with you
1. You identify the client and the key employees
A short call covers the business, the employees and the bonus budget.
2. We prepare the options
You and the client see the premium, the cost after the deduction and the policy options side by side.
3. The employee applies
We handle the application and underwriting with the employee directly.
4. You handle the payroll treatment
The bonus runs through payroll as compensation; you confirm the year of deduction and reporting.
Talk to us before year-end
Underwriting can take several weeks, so the best time to start is during your year-end planning meetings. Contact us to set up a 20-minute call.
General information, not tax or legal advice. We do not provide tax advice; the CPA and the client’s attorney are responsible for tax treatment and the vesting agreement.
Contact Lifeworth Insurance
Lifeworth Insurance Agency
2881 E Oakland Park Blvd, Fort Lauderdale, FL 33306
(954) 834-5433 · contact@lifeworthinsurance.com