1. Marina Financial Design, LLC Executive Compensation Solutions
Executive Bonus Plans
I would like to discuss with you today a new and, I believe, a better way for us to work together.
It is fee-based asset management, a response to these times of change.
John Hancock - Insurance

2. Executive Compensation Solutions
Marina Financial Design, LLC
Financial, Estate & Retirement Plan Solutions
Retirement & Executive Benefit Plans
AL TATRO, PPC™, AIF®, QPFC®
At > (310)
John Hancock - Insurance

3. Your Situation
You work hard for your employer and bring great value to your company
You are concerned about saving enough for retirement, and perhaps have even contributed the maximum amount to your 401(k) and other qualified plans
You want to protect your family if anything should happen to you pre-retirement
You work very hard not only to provide for your family and your future, but also because you take pride in the value you bring to your company. Although you are diligent about saving for retirement, sometimes you feel that you cannot save enough on a tax-preferred basis due to qualified plan limitations. Also, you worry about what might happen to your family should something happen to you before retirement. Will they have enough money to cover their needs? A Restricted Bonus Endorsement Arrangement (REBA) may be able to help.
John Hancock - Insurance

4. FOR BROKER/DEALER USE ONLY
Executive
Bonus
Plans
An Executive Bonus Plan may be able to help.
FOR BROKER/DEALER USE ONLY
FOR BROKER/DEALER USE ONLY. 4 4
John Hancock - Insurance

5. What is an Executive Bonus Plan?
Sometimes called a “162 Bonus Plan”
Your employer pays you a bonus for the purchase of a life insurance policy owned by you.
Your employer agrees to pay the premium bonus as long as you stay with the company
At retirement, you will be able to access the potential policy cash value via tax-favored loans and withdrawals.
An Executive Bonus Plan (also known as a “162 Bonus Plan”) is an arrangement in which your employer pays a bonus to you by paying the annual premium on a life insurance policy on your behalf. You will be the owner of the policy and have the right to name the beneficiaries of the policy. You will also own any potential policy cash value and be able to access it at retirement via tax-favored loans and withdrawals. [i]
[i] Loans and withdrawals will reduce the death benefit, cash surrender value, and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59 ½.
John Hancock - Insurance

6. How does an Executive Bonus Plan work?
You will apply for a life insurance policy on your own life,
You will own the policy cash value and have the right to name the beneficiaries.
Your employer will pay the premium on your behalf, in the form of a bonus.
You will apply for a life insurance policy on your own life. You will retain all rights of ownership in the policy, including access to the policy cash value and the right to name the beneficiary of the death benefit. Your employer will pay the life insurance premium on your behalf, which will be included in your taxable compensation.
John Hancock - Insurance

7. How does an Executive Bonus Plan work?
You will pay taxes on the vested portion of the bonus.
Your employer may provide a “double-bonus”.
Pre-retirement, your family enjoys death benefit protection.
At retirement or vesting, you may use the potential cash value as supplemental retirement income.
You will be responsible for paying the income tax due on the bonus, however, the life insurance policy cash value will grow on a tax-deferred basis. If feasible, your employer may also choose to increase the bonus to cover both the premium and your tax costs. This approach is called a “double bonus”.
At retirement, you may be able to use the potential cash value in any way desired, including supplementing retirement income through policy loans and withdrawals.
John Hancock - Insurance

8. Benefits of an Executive Bonus Plan
The arrangement provides you affordable life insurance protection.
You own the potential policy cash value, which grows tax-deferred.
You can access the potential policy cash value at any time, and take tax-free loans and withdrawals to supplement your retirement income.
Self-explanatory
John Hancock - Insurance

9. Considerations
The bonus is includable in your taxable income, although your employer may offer you a double-bonus if feasible.
The policy cash value available for loans and withdrawals may be worth more or less than the original investment amount
The bonus is includable in your taxable income, although your employer may offer you a double-bonus if feasible.
The policy cash value available for loans and withdrawals may be worth more or less than the original investment amount, depending on the performance of underlying investment options (if you elect a variable life insurance policy) or the policy crediting rate (if you elect a fixed life insurance policy).
John Hancock - Insurance

10. FOR BROKER/DEALER USE ONLY
Case Study:
Cordova Productions And Gabrielle Gerard
Self-explanatory
FOR BROKER/DEALER USE ONLY
FOR BROKER/DEALER USE ONLY. 10 10
John Hancock - Insurance

11. Cordova Productions and Gabrielle Gerard
Cordova Productions is a film company
Jeffrey Cordova is the owner and CEO, and has just hired Gabrielle Gerard away from the competition
Jeffrey would like to reward Gabrielle for coming to his company and provide a gentle incentive for her to stay with Cordova Productions
Cordova Productions is a Californian company that invests in the creation and production of movies. It’s owner and CEO is Jeffrey Cordova. Last year, Jeffrey hired Gabrielle Gerard away from his main competitor. Gabrielle is known throughout the industry for her creativity and the contacts she has made, and Jeffrey wants to do everything possible to get her to stay with his company. Jeffrey decides to implement an Executive Bonus Plan. Although Jeffrey has many employees, only Gabrielle will participate in the plan because she is the only employee he is anxious to reward.
John Hancock - Insurance

12. Cordova Productions and Gabrielle Gerard
Jeffrey implements an Executive Bonus Plan for Gabrielle
Gabrielle is a Female, NS Preferred, age 42, who lives in California.
Gabrielle purchases a $687,006 Accumulation UL policy with an increasing face amount and $30,000 premium.
Jeffrey will double-bonus her $46,154, enough money to pay the premium and the taxes due on the bonus.
Gabrielle will apply for a $687,006 Accumulation UL policy on her life[i], with an increasing death benefit and an initial premium of $30,000. Jeffrey will double-bonus her $46,154 a year until age 65, so at Gabrielle’s tax bracket of 35%, she will have enough to pay both the premium and the taxes with no out of pocket costs to herself. [i] Based on Female, NS Preferred age 42, living in California. Annual premium of $30,000 will be paid for 23 years. At the current crediting rate of 5.5% and current charges initial increasing face amount is $687,006 and will remain in force until age 100.
John Hancock - Insurance

13. Cordova Productions and Gabrielle Gerard
Cordova Productions will get to deduct the bonus and enjoy a tax savings of 18,462 at its 40% tax bracket.[ii] Gabrielle will own the policy and enjoy the death benefit protection for her family, as well as any potential policy cash values. As long as she stays with Cordova Productions, Jeffrey agrees to pay the double-bonus. At retirement, Gabrielle has access to any potential cash value in the form of loans and withdrawals to supplement her retirement income. Based on current mortality charges and the current crediting rate of 5.50%, Gabrielle will be able to pull out $139,509 a year for 20 years and still have the policy remain inforce until age 100.[iii]
[ii] The amount of the bonus that the employer is able to deduct is subject to reasonable compensation limits. A detailed discussion of this is beyond the scope of this document, clients should consult their tax advisors.
[iii] Based on Female, NS Preferred age 42, living in California. Annual premium of $30,000 will be paid for 23 years. At the current crediting rate of 5.50% and current charges initial increasing face amount is $687,006 and will remain in force until age 100.
The data shown is taken from an illustration. It assumes a hypothetical with interest crediting rate and is not a representation of expected future results. Unless indicated otherwise, these values are not guaranteed.
John Hancock - Insurance

14. Marina Financial Design, LLC www.mfdllc.com
For more information
Please contact
AL TATRO, PPC™, AIF®, QPFC®
Marina Financial Design, LLC
John Hancock - Insurance