reward & retain with simplicity restricted executive bonus arrangements (rebas) ©2014 voya...

Reward & Retain with Simplicity

Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0318-16261-0417

1

©2014 Voya Services Company. All rights reserved. CN0318-16261-0417 2

Important Disclosures

The Voya™ Life Companies and their agents and representatives do not give tax or legal advice. This information is general in nature and not comprehensive, the applicable laws change frequently and the strategies suggested may not be suitable for everyone. You should seek advice from your tax and legal advisors regarding your individual situation.

These materials are not intended to and cannot be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matter addressed in this document. The taxpayer should seek advice from an independent tax advisor.

Life insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN), ReliaStar Life Insurance Company of New York (Woodbury, NY) and Security Life of Denver Insurance Company (Denver, CO). Within the state of New York, only ReliaStar Life Insurance Company of New York is admitted and its products issued. All are members of the Voya™ family of companies.

All guarantees are based on the financial strength and claims paying ability of the issuing insurance company who is solely responsible for all obligations under its policies.

This description of a REBA arrangement assumes that income taxation is pursuant to IRC Sections 61 and 162 and is not subject to IRC Sections 409A or 83. A REBA may also be subject to ERISA plan requirements. Clients should seek advice from their tax and legal advisors.


Introducing the Restricted ExecutiveBonus Arrangement (REBA)

Simple plan design



Simple plan design

Deduction for Employer



Simple plan design


Provides “Golden Handcuffs”



Simple plan design



May avoid § 409A Rules



*Loans and withdrawals may generate an income tax liability, reduce available cash value and reduce the death benefit or cause the policy to lapse.

Simple plan design




Flexibility to change timing of

loans/withdrawals*



Simple plan design




Flexibility to change timing of

loans/withdrawals*

Subject to ERISA

*Loans and withdrawals may generate an income tax liability, reduce available cash value and reduce the death benefit or cause the policy to lapse.


Employer makes taxable payments on cash value life insurance policy owned by executive

Employer and Executive execute restrictive endorsement to policy

Executive uses policy as source of supplemental retirement income after any restrictions have ended ¹

Policy provides executive a death benefit ² ¹ The policy's cash values are available to the executive as a source of supplemental retirement income through loans and withdrawals. Loans and withdrawals may generate an income tax liability, reduce available cash value and reduce the death benefit or cause the policy to lapse.

² Proceeds from an insurance policy are generally income tax free.

Restricted Executive Bonus Arrangement (REBA)



Employer Executive1



Employer Executive

Voya Life Companies

1

2



Employer Executive

Restrictive Endorsement

Voya Life Companies

1

3

2



Employer Executive


Voya Life Companies

1

3

24



Employer Executive


Voya Life Companies

1

3

2 54


Potential Advantages Policy cash values may provide

executive with additional funds for retirement

“Golden Handcuffs” for business Flexibility on timing of payments

for executive Death benefits generally not

taxable as income1 Policy not subject to claims by

employer’s creditors

Some Disadvantages Immediate taxation to executive No cost recovery available

to employer Executive must repay company

for any unvested amounts in the event of termination or separation of service

1 Proceeds from an insurance policy are generally income tax free (e.g., absent a transfer for value), and if properly structured, may also be free from estate tax.



Summary

Employer gives executive a financial incentive (“golden handcuffs”) to continue employment

Annual premium advances & bonuses are generally income tax-deductible to Employer

Executive has flexibility to determine timing of distributions for supplemental retirement income after restrictions end


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reward & retain with simplicity restricted executive bonus arrangements (rebas) ©2014 voya...

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