The Stock Incentive Plan for the Client Who Can't Afford One

Closely held companies can compete with public companies' stock incentive plans with a variable life plan funded by a split-dollar arrangement. A sales presentation with the owner of a typical closely held business might start with the producer pointing out that, despite competitive salary pack...

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Bibliographic Details
Published inAdvisor today Vol. 87; no. 10; p. 95
Main Author McCarthy, Timothy P
Format Magazine Article
LanguageEnglish
Published Washington National Association of Insurance and Financial Advisors Service Corporation 01.10.1992
Subjects
Administrative expenses
Closely held corporations
Compensation plans
Employees
Equity
ESOP
Executive compensation
Incentive plans
Insurance agents & brokers
Investment policy
Investments
Marketing
Public companies
Sales presentations
Split dollar arrangements
Stock options
Target markets
Variable life insurance
Wages & salaries
US
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Summary:Closely held companies can compete with public companies' stock incentive plans with a variable life plan funded by a split-dollar arrangement. A sales presentation with the owner of a typical closely held business might start with the producer pointing out that, despite competitive salary packages and annual bonuses, the prospect's compensation plan does not include stock option plans. Next, the producer might ask if the prospect would be interested in a plan that would: 1. provide for rewards for selected key employees in a way that would also help retain them, 2. take care of families of employees who die before retirement, and 3. eventually repay the company's contributions. The producer then shows how a split-dollar life insurance plan funded with variable life insurance can provide such a package. One advantage of the plan is that, since the company's dollars are used to fund it, the executives' outlays are minimal. Another is that executives themselves choose how to invest their share of the fund values within the variable life contract.
ISSN:1529-823X