1. Some difficult questions for you and your business
Executive Bonus Plan
Some difficult questions for you and your business
About this presentation: Executive Bonus Plan Presentation
Add your rep or agency disclosure to the last page if you have one
[Name], as I have gotten to know about you and your business, it became apparent that we should spend a few minutes thinking about some difficult questions that you as a business owner may have to answer someday…
Background Info for presenter:
Before presenting the Executive Bonus Plan concept, you want to become familiar with the business and the issues faced by the owner. There are two things in particular that you must find out from the business owner:
1) What is the business structure? Is the business taxed as a sole proprietorship, partnership, C corporation, or S corporation? Why?
2) Does the business have key employees besides the owner? Does he or she want to take care of them?
Review the Producer Quick Facts (Pub5870BL). Other pieces you’ll find useful to educate yourself are the Summary Chat showing tax info. and other key facts around all of your programs (Pub5766BL), the Programs and Prospects flyer (Pub5412BL), andPub5875BL flyer for employers.
This presentation on the executive bonus plan is designed to be used with small business owners. It focuses on the problems involved with the loss of a key employee due to disability.
Note: The executive bonus plan could also apply to the shareholder-employee of a C corporation (as an alternative to a qualified sick pay program-QSPP), who wants to have the business pay for coverage, but who would want a tax-free benefit. On the other hand, the premium would be counted as income to such an owner; the QSPP approach is likely to be more attractive to them
John Q. Agent
Agency

2. What’s Your Plan?
If one of your key employees, your partner, or even you became too sick or injured to work, would:
You continue to make salary payments?
Your business be able to make payments?
For how long?
Your business suffer?
What would it take to replace a key employee?
What would happen to your business if you lost a key employee?
You may indeed want to continue salary, but the hard part may be making the payments themselves – especially if a key employee is disabled for an extended period of time. Are you confident that the business will be able to meet these obligations over the long haul?
What would the loss of a key employee mean to the business itself? Would it take money and time to replace him or her?
The Guardian Life Insurance Company of America New York, NY 10004

3. What are the odds? Odds of a Disability 1 in 4 of today’s
20-year-olds will become disabled before retiring.*
(Optional Slide)
You are probably asking yourself - could a disability really happen to me or one of my key employees? Unfortunately, this is indeed a real risk to your business.
According to the Council for Disability Awareness, 1 in 4 of the 20-year-olds entering the workforce today will become disabled before retiring.
And if you’re thinking that most disabilities are the result of freak accidents, then you’re in for a surprise. According to the Council for disability awareness, 90% of disabilities are caused by illnesses such as muscle and back problems, cancer, mental disorders like anxiety and depression, and heart disease. (per CDA website, March 2013)
*U.S. Social Security Administration Fact Sheet, February 7, 2013.

4. Other Tough Questions What constitutes a disability?
Who makes that call?
How will partial
disabilities be
handled?
Other tough questions also arise. How do you determine if a disability in fact exists? Who will make the call? How will partial disabilities be handled?

5. Disability Income Insurance
Protects from an unpredictable but potentially catastrophic risk
Shifts the financial liability to the insurer
Offers affordable, predictable costs
Provides clear determination of disability, level, and timing of benefits
Consider the advantages of transferring the risk with disability insurance. This way you shift the financial liability of disability payments from your business to the insurance company. Disability insurance protects from an unpredictable but potentially catastrophic risk.
Using disability insurance offers you affordable, predictable costs – generally a fraction of the payments you might otherwise be obligated to make if an employee becomes disabled.
You also relieve yourself of other potentially thorny issues as well, such as deciding when an employee is actually disabled, and when he or she has recovered. These are issues that businesses often overlook, and which lead to misunderstandings with employees. An insurance policy will spell out how much the benefit will be, when benefits will start, and how long benefits will be paid.
In effect, the insured approach takes some tough burdens off your shoulders.

6. Under an Executive Bonus Plan…
Insurance premiums treated as a “bonus” to the employee – and therefore tax-deductible
Policy is owned by the employee (portable)
Bonus is included in employee’s W-2 income
Employee pays tax only on the bonus
Employee receives benefits tax-free
And funding the insurance under an executive bonus plan may be the most advantageous way to go. Under an executive bonus plan:
The business pays the insurance premiums, which are treated as “bonus” compensation to the employee - and therefore tax-deductible to the business
The bonus (i.e. the insurance premium) is included in the employee’s W-2 income.
The employee, then, pays tax only on the bonus
The employee receives any policy benefits on a tax-free basis.

7. Advantages to You Simple written agreement You decide… Who to include
Level & timing of benefits
An executive bonus plan is easy to set up. A simple written agreement to document the plan will do. And you maintain control. You decide which employees to include, as well as the level and timing of benefits.

8. We Make it Easy Sample plan agreement Annual reviews
Discount for three or more
participants
Guardian has long been an expert in the area of executive bonus plans. We take care of all the details for you…
We provide you with the one-page sample plan agreement to help you and your advisor set up the plan. We also perform annual reviews to assure that your plan is kept up to date. A discount on the cost of the insurance is available if you have three or more participants in the plan. Finally, funding your plan with the ProVider Plus policy means that you are getting one of the finest available disability insurance policies on the market.

9. Executive Bonus Plan Helps assure financial stability
Rewards your key people
You have a clear plan in place
To sum up, an executive bonus with insurance funding helps to assure financial stability to the disabled employee and your company.
A plan also rewards the key people who have helped your business grow. Most importantly, you will have a clear plan in place to handle this contingency.

10. Next Steps Identify who will be covered Determine level of benefits
Enroll participants
Document the plan
To get started, we need to first identify who you want to be covered under the program. Then we figure out what benefits are available, and begin enrolling participants. While I’m working on those details, you should take steps to formally adopt and document the plan, using our sample agreement.
Let’s first discuss who you want to include…

11. Add your rep or agency disclosure if you have one to this slide
Disability insurance products underwritten and issued by the Berkshire Life Insurance Company of America, Pittsfield, MA, a wholly owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York, NY or provided by Guardian. Product provisions and availability may vary by state.
This publication is provided for informational purposes only and should not be considered tax or legal advice. Please contact your tax or legal advisor regarding the tax treatment of the policy and policy benefits. You should consult with your own independent tax and legal advisors regarding your particular set of facts and circumstances. The information provided is not intended or written to be used, and cannot be relied upon, to avoid penalties imposed under the Internal Revenue Code or state and local tax law provisions.
Rep or agency disclosure if you have one
Pub5875BL-PPT (05/13)
(Expires 05/15)
Add your rep or agency disclosure if you have one to this slide
The Guardian Life Insurance Company of America New York, NY 10004