Executive Bonus
Provide Disability Income for a selected employee(s). Premiums are deductible to the company, as they constitute compensation to the employee. The amount of the premium will appear in the employee's W-2 as taxable wages, making the benefit income tax-free to the employee. This arrangement can be either formal or informal. In a formal arrangement, the business adopts a resolution to pay a bonus for the express purpose of paying a disability insurance policy. Premiums are paid directly to the insurance company. Under an informal bonus arrangement, the business pays additional compensation to the employee and the employee pays the premiums for the disability income policy, often through payroll deductions. Under either arrangement, the firm may bonus an additional amount to cover the tax obligation created by the initial bonused premium amount. This method is often referred to as a "double-bonus".
