The Best Kept Secret to Retain Top Executives (Hint: It’s not your 401(k))

May 9, 2022

The most challenging aspect of running your business today is key employee retention.  

How do I keep my top executives happily employed and prevent them from leaving for another job?

That is the million-dollar question that we, as owners, face every day.

There are millions of jobs available today and the compensation for these is going up by the month. So, none of us want, or can really afford, to lose these executives.

The answer to this issue is…Deferred Compensation. Assuming you are not part of a public company with stock options, creating a deferred compensation plan can really help in retention.

Here is how it can work:

Let’s begin with the moving parts.

You can use employee bonus money or company bonus money. This can be deposited into a 401(k)-look-alike plan, with a new vesting schedule to keep the employee for five to ten years. Or it can be used as a premium into a Corporate-Owned Life Insurance Contract, usually Index Universal Life. 

In these contracts, the insured would be the executive and the company would own the cash value and the life insurance amount, with an agreement to create a private pension type of plan once in retirement. The company would have a deferred taxable write-off and the executive would not be taxed until retirement.

Plus, the executive’s family can also be protected should they die before retirement. This can be incredibly profitable for both the company and the retired executive. I know this sounds complicated, and it can be. Even so, it may be something you may wish to take a look at and benefit from.

Optimize Your 401(k) Plan

For more information and the details on how a Deferred Compensation Plan could be an incredibly effective retention tool, contact me below.

All my best,

Elliot Kallen

925-314-8503

Elliot@ProsperityFinancialGroup.com

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