A powerful tool for attracting, retaining, and rewarding top talent.

Businesses increasingly use life insurance to fund executive benefit programs that go beyond traditional compensation. Indexed Universal Life (IUL) offers unique advantages for non-qualified benefit structures such as SERPs, Key Person arrangements, and Executive Bonus Plans.

Why IUL Is Effective in Executive Benefits

1. Cash Value Accumulation for Future Payouts

SERPs and deferred compensation structures rely heavily on long-term funding. IUL provides tax-deferred growth with downside protection and controlled exposure to market upside.

2. Flexible Premium Structures

Employers can design predictable contributions or flexible funding schedules as part of benefit programs.

3. Tax-Advantaged Access for Executives

Through withdrawals and loans, executives may access cash value tax-advantaged (subject to non-MEC status and policy rules).

4. Permanent Protection

Policies can provide death benefit protection during employment and beyond, enhancing the overall benefit package.

Common Executive Benefit Structures Using IUL

Executive Bonus Plans (162 Bonus)

The business pays premiums as taxable compensation to the executive.
The executive owns the policy and benefits from long-term cash value.

Supplemental Executive Retirement Plans (SERPs)

Employer-funded plans that provide future retirement income.
IUL serves as the funding vehicle, with the employer owning the policy.

Key Person Coverage

Protection against financial loss if a key executive passes unexpectedly.
IUL's retention value and cash accumulation support broader compensation planning.

Buy-Sell & Business Continuation Planning

IUL can help fund agreements, maintain liquidity, and preserve business stability.

Advantages for Employers

• Improve retention with golden handcuff strategies
• Offer competitive non-qualified benefits
• Build long-term value without ERISA plan restrictions
• Maintain control or oversight through ownership structures (varies by plan)

Advantages for Executives

• Tax-advantaged accumulation potential
• Access to policy cash value for retirement or personal needs
• Long-term wealth transfer opportunities
• Additional financial protection for their families

Risks & Considerations

• Carrier index crediting can vary
• Funding discipline is critical for long-term value
• Tax and legal structures must be reviewed with advisors
• Policy loans must be coordinated with plan design

Final Thoughts

IUL provides a flexible, long-term solution for both employers and executives looking to build value beyond traditional compensation. When structured correctly, it becomes a cornerstone tool for talent retention, retirement benefit design, and broader corporate planning.

Want to explore IUL-based executive benefit structures?
Our team can help analyze, design, and model SERPs, Bonus Plans, and Key Person strategies.
→ Connect With a Specialist

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