Business Planning Using Life Insurance

Restricted Endorsement Bonus Arrangement (REBA)

There are several ways that life insurance can enhance financial planning for your or your clients’ businesses.  From buy/sell funding to executive benefits, using discounted dollars by way of premium payments to fund certain expenses with a death benefit makes a lot of sense for many business owners.  Additionally, the cash value inside a permanent policy can be accessed to use as a living benefit.  Every business should consider life insurance solutions as part of their financial planning.

A competitive compensation and benefits package is essential to attract and retain key employees. But qualified plan limits restrict an employer’s ability to target certain executives or highly compensated employees. A restricted endorsement bonus arrangement (REBA) is a type of Section 162 Executive Bonus Plan that provides employers with a flexible, tax-efficient way to reward key employees while maintaining a high level of company control over the policy.

As with a basic IRS Section 162 Executive Bonus Plan, the employer pays the annual premium as a bonus on a life insurance policy that a select, key employee owns and is the insured.1 The REBA adds a “restricted endorsement” which limits the employee’s access to the policy’s cash value determined either by a vesting schedule or a triggering event such as retirement. This restriction is commonly referred to as a “golden handcuff” because it provides the key employee with incentive to remain with the company.

Click here to read more about using a REBA for business planning:  Restricted Endorsement Bonus Arrangement (REBA).

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