One of the best ways to keep highly valuable employees is to offer fringe benefits. One benefit that can be mutually beneficial to you as the business owner and your valued employees is a split-dollar plan.
How split-dollar works
Through a split-dollar plan, you enter into an agreement with your employee through which you share the rights and obligations of a life insurance policy.
As the business owner, you generally pay the policy premium and your employee, as the insured, has the benefit of life insurance protection at an affordable cost. The benefit continues as long as the split-dollar plan is in force (typically, as long as the employee works for you). If the employee leaves the company or passes away, you have certain rights in the policy, depending on the type of split-dollar plan chosen.
Split-dollar plans can help you:
- Offer a benefit with mutual protection: Your employee gets life insurance protection while your premiums may be returned on the benefit if the employee leaves the company or passes away.
- Be selective: Unlike a qualified retirement plan, you can be selective when you choose which employees get this benefit.
- Have flexibility in policy design: From how premiums are paid to who owns the policy, split-dollar plans can be designed to meet the needs of your business.
Your financial professional can help you explore split-dollar plans as a protection strategy for your business.
This material provides general information that is designed to be educational in nature and is not intended as specific tax or legal advice to any particular individual nor the law of any particular state. Please seek the advice of a qualified tax or legal professional for your specific situation.
Products are issued by AuguStar Life Insurance Company and AuguStar Life Assurance Corporation. Product, product features and rider availability vary by state. Issuer not licensed to conduct business in NY.