Retain and reward your top talent
As you make investments, it’s important to ensure you’ve taken all necessary steps to protect them, including preparing for the potential loss of key individuals.
Retaining top talent during an acquisition is a major priority, especially members of the executive staff. Executive benefits are designed to provide top employees with a higher level of benefits and compensation, especially since 401(k)s restrict the amount of money an individual can contribute on a tax-favored basis.
Key persons example strategies
Protect your investment
Your investment in the company is, in large part, dependent on the key people who are instrumental to the continued success of the business. If one of those key people were to die or become disabled, the investment could be lost, but definitely would be negatively impacted.
Life insurance
Key person life insurance will provide tax-free payments to the company to help recoup some of the costs and potential lost revenue. To give you an idea of the cost for $25 million of protection we’ve provided some estimated ranges below:
| 20 Year Term | $5 Million | $7.5 Million | $10 Million | |||
| Preferred | Standard | Preferred | Standard | Preferred | Standard | |
| Age 40 | $3,490.95 | $5,692.45 | $5,198.83 | $8,501.18 | $6,906.90 | $11,309.90 |
| Age 50 | $9,077.95 | $14,665.45 | $13,579.43 | $21,960.68 | $18,080.90 | $29,255.90 |
| Age 60 | $26,144.95 | $42,262.30 | $39,179.93 | $63,355.95 | $52,214.90 | $84,449.60 |
Data Breach Anchor
Retain and reward
The most likely reason a key person might leave is to join another firm. Many firms are entering this industry or expanding their footprint and are looking for quality people to lead their efforts.
Golden handcuff
Golden Handcuff plans are designed to create loyalty and keep these key people. By promising a significant future benefit (Golden) that is contingent on completing a service period (Handcuff), businesses are able to tie the employee to the business. Incentives/rewards for achieving certain targets can be built into these plans.
There are many plan types and designs available. Below are some estimated cost ranges for a popular design.
| Current (non guaranteed) based on premium allocation and interest rate tables | |||||||||
| Year | Employer net after-tax outlay | Employer net surrender value | Employer net accumulated value | Employer net loss benefits | Employee tax on bonus | Economic benefit cost | Employee net after-tax outlay | Employee net surrender value | Employee net loss benefit |
| 1 | $50,000 | $23,619 | $43,091 | $50,000 | $0 | $474 | $142 | $0 | $717,760 |
| 2 | $50,000 | $69,615 | $88,639 | $50,000 | $0 | $534 | $160 | $0 | $763,308 |
| 3 | $50,000 | $118,206 | $136,782 | $50,000 | $0 | $600 | $180 | $0 | $811,451 |
| 4 | $50,000 | $169,542 | $187,670 | $50,000 | $0 | $681 | $204 | $0 | $862,339 |
| 5 | $50,000 | $223,779 | $241,459 | $50,000 | $0 | $760 | $228 | $0 | $916,128 |
| 6 | $50,000 | $281,529 | $298,314 | $50,000 | $0 | $856 | $257 | $0 | $972,983 |
| 7 | $50,000 | $344,137 | $358,409 | $50,000 | $0 | $961 | $288 | $0 | $1,033,078 |
| 8 | $50,000 | $411,241 | $421,931 | $50,000 | $0 | $1,086 | $326 | $0 | $1,096,600 |
| 9 | $50,000 | $482,121 | $489,073 | $50,000 | $0 | $1,222 | $367 | $0 | $1,163,742 |
| 10 | $50,000 | $556,712 | $560,042 | $50,000 | $0 | $1,408 | $422 | $0 | $1,234,711 |
Business interruption Anchor
