Employee Retention

Employee Retention

Retain Top Talent With A Key Employee Benefit

As a business owner, it’s to your benefit to keep your top employees feeling rewarded and appreciated. Showing your employees that you recognize their value is a key factor in employee retention. And with the high cost and time investment involved in recruiting and training new talent, employee retention is more important to the success of your business than ever.

Allmerits Financial can help you retain your top talent with a variety of strategies.

Reward Your Employees With Life Insurance Using a Split Dollar Plan

A split dollar plan is a business paid life insurance benefit that provides cost recovery for the business. Under a split dollar plan, you have the opportunity to reward and retain your key employees. There are two types of split dollar plans – collateral assignment/loan regime and endorsement split dollar/economic benefit regime. Each type has unique features to meet various business objectives.

1. Collateral assignment/loan regime

When the plan is designed this way, the employee owns the policy and the employer lends the premium required to pay for it. The employee is taxed on the interest-free element of the loan. Upon separation of service, the loan may be paid back by the employee or forgiven by the employer. If it is forgiven, there will be tax implications for the employee and the employer will receive a tax deduction.

2. Endorsement split dollar/economic benefit regime

The employer owns the policy and allows the employee to name the policy beneficiary. The employee’s economic benefit is in the value of the life insurance coverage. At the end of the arrangement, the policy may be transferred to, or purchased by, the employee.  

Potential employer benefits

  • You can select who receives benefits, when they receive them and how much they receive
  • Lack of limits or rules associated with traditional qualified plans
  • Low start-up and administrative expenses
  • You can potentially recoup your business’ investment when a valued employee quits, retires or dies

Potential employee benefits

  • Your business makes the premium payments for personal life insurance protection
  • They have flexibility in the plan design to meet their individual needs
  • They have the ability to receive tax-free income via partial withdrawals and loans
  • Opportunity for tax-deferred growth of cash values

SERPs Offer Key Employees Another Retirement Benefit

A supplemental executive retirement plan, or SERP, is an employee benefit designed to establish an additional retirement option for employees. A supplemental executive retirement plan, or SERP, is a benefit you can offer to provide retirement income for a group of key employees. As the employer, you’ll have the flexibility to choose either a fixed-dollar benefit amount or a formula-based benefit amount for your employees, based on participant compensation and/or years of service. You can also design the plan to provide reduced benefits if the employee separates from service before retirement age.

Potential employee benefits

  • Taxes on income are deferred until the employee receives distributions
  • There are no required minimum distributions at age 70½
  • Employees may take distributions before age 59½ without penalty
  • Plan has an easy-to-understand formula driven benefit

Potential employer benefits

  • You can choose the employees that participate
  • The company can recover out-of-pocket costs through the life insurance death benefit
  • The employee’s benefit is predictable for retirement and accounting purposes