TAX INCOME SOLUTIONS

A common benefit offered to employees are retirement plans in which the employee can invest pre-tax dollars. Employee contributions are deposited into many different types of investment vehicles.

Annuity and Life Insurance Products are frequently included in the investment portfolio. These products have strong track records of growth combined with security of the invested dollars. Doug McClure, CEO of Global Investment Strategies, described the benefits of these programs this way:

“Companies are looking for competitive advantages that attract top talent to their organization. Offering pre-tax investment options that include high performing life insurance products is one very clear way to differentiate a firm and the way they work for their employee’s benefit.”

the three types of tax income solutions

Defined Benefit

Defined benefit plans “declares” an annual amount of money that the executive is going to receive in retirement. The money contributed to the plan is deductible by the corporation and must be reviewed annually by a third party administrator as “On Track” for being able to provide the benefit.

Defined Contribution

Defined contribution plans are also governed by ERISA, but instead of the company guaranteeing a “declared” retirement income, the company acts as trustee for a retirement plan that is funded by the employee investing part of their income into the plan.

Captive Insurance Planning

Captive insurance is a method of transferring risk that is either covered or non-covered by traditional insurance coverage. Any time a premium is paid for a business risk, it can be expensed by the business.

Defined Benefit

Defined benefit plans “declares” an annual amount of money that the executive is going to receive in retirement. The money contributed to the plan is deductible by the corporation and must be reviewed annually by a third party administrator as “On Track” for being able to provide the benefit. It is the responsibility of the corporation to meet the necessary obligation. The income received at retirement by the employee is fully taxable as ordinary income. These plans are governed by ERISA and need to filed with the department of labor each year on form 5500. There are many variation of these plans including the ability to invest in annuity and life insurance products with the pretax dollars.

Defined Contribution

Defined contribution plans are also governed by ERISA, but instead of the company guaranteeing a “declared” retirement income, the company acts as trustee for a retirement plan that is funded by the employee investing part of their income into the plan. The most common types of defined contribution plans are 401k, sep, and simple plans. The company expenses the dollars directed by the employee as payroll and the employee owns the deferred tax dollars and can distribute the dollars subject to qualified plan rules.

Captive Insurance Planning

Captive insurance is a method of transferring risk that is either covered or non-covered by traditional insurance coverage. Any time a premium is paid for a business risk, it can be expensed by the business. If you own the insurance company, “ the captive insurance company” only covers the risks that you deem necessary. If no claims are generated, premium payments become premium profits of the insurance company. Small insurance companies enjoy a tax exclusion of up to 1.2 million in premium profit under section 831b of the IRC.

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