Section 162 Plans. Often called "Executive Bonus Plans," section 162 plans are a simple way to reward your top people. Under this type of plan, the employee purchases a permanent life insurance policy on his or her life. The company bonuses the employee the premium, which is usually considered taxable income to the employee and tax-deductible to the employer. The employee controls the policy, including the death benefit and the cash value, which accumulates tax-free until it is withdrawn.
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