Life · Chapter 10 · Executive Benefit Plans
Executive Bonus Plan (§162)
Definition
Employer pays a bonus that a selected employee uses to pay premiums on a life policy the employee personally owns. The bonus is tax-deductible to the employer and taxable income to the employee; death proceeds go to the employee's beneficiary income tax-free.
Exam tip
Follow the ownership: §162 bonus = EMPLOYEE owns the policy. Key person/COLI = EMPLOYER owns it. That single fact answers most questions.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
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