Key Person Insurance
Key person insurance is needed if the sudden loss of a key executive would have a large negative effect on the company's operations. The payout provided from the death of the executive essentially buys the company time to find a new person or to implement other strategies to save the business.
Acollection of financial incentives that are intended to encourage employees to remain with a company for a stipulated period. Golden handcuffs are offered by employers to existing employees as a means of holding onto key employeesand increasing employee retention rates. Using Life insurance to fund a supplemental retirement income, via a deferred compensation arrangement, is very common. However, the two biggest stumbling block is 1) the deductibility of premiums paid or more specifically the lack thereof and 2) how said premium commitments could affect cashflow if the business were to experience an economic downturn. FIT™ eliminates both concerns as this is a “cashless” transaction.
Non-Qualified Deferred Compensation (NQDC)
A NQDC plan allows a service provider (e.g., an employee) to earn wages, bonuses or other compensation in one year but receive the earnings — and defer the income tax on them— in a later year. Doing this provides income in the future (often after they've left the workforce) and may reduce the tax payable on the income if the person is in a lower tax bracket when the deferred compensation is received. NQDC is another form of “Golden handcuffs” and is more often than not used in conjunction with life insurance as the funding vehicle. However, a company that is analyzing the pros and cons of how to fund a NQDC would be faced with the same concerns as any other Golden Handcuff perk in which they’re considering. However, utilizing a “cashless” approach eliminates this concern for the company.