Tax TreatmentQuestion 715 of 716
In an executive bonus (Section 162) plan, the employer:
a.Owns the life insurance policy outright and names itself as the beneficiary, while the executive simply agrees to be the insured person
b.Pays a bonus, deductible to the employer and taxable to the executive, that the executive uses to pay premiums on a policy they own
c.Provides no real benefit to the executive
d.Cannot deduct any part of the arrangement
Explanation
In a Section 162 executive bonus plan, the employer pays a deductible bonus (taxable to the executive) and the executive owns the policy and pays its premiums. The employer does not own the policy.
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Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)