Successful companies know that finding and keeping talent can be difficult and recognize the importance of business plans that accomplish the "three R's" -- recruiting, rewarding and retaining key employees.
One tool used to achieve these goals is an executive benefit plan, which enables companies to design a flexible, cost-efficient compensation arrangement for valued executives, offering incentives beyond those included in standard benefit packages.
While executive benefit plans offer executives enticements to stay with the company and remain motivated to achieve superior performance, these benefits also have business advantages. An attractive plan enables owners to remain competitive in hiring and keeping talented managers, a valuable business strategy in an aggressive marketplace. And the company's bottom line will ultimately show the positive results of enhanced productivity of motivated and successful high-level workers.
Since executive benefit plans are created with a company's goals and unique business characteristics in mind, each is different. However, most offer a variety of benefits, including personal trust and estate planning services and personal financial and investment assistance.
Deferred compensation programs are another popular option. Through participation in these, executives lower their immediate tax bill and build retirement savings by deferring payment of a portion of their income until a determined date. Often that date is retirement, when lower income tax rates may apply.
Companies often offer fully funded deferred compensation programs to certain executives. In this case, participants receive their full salary while the company contributes to the program on behalf of the employee.
Insurance is another key consideration in executive benefit plans. It's important to have a plan in place should the owner of a business or key members of the executive team die or be temporarily disabled. Insurance provides financial leverage to implement succession plans or business transfers. Payouts from a life insurance policy can fund buyouts and benefits packages, depending on how the business plans and insurance policies are written.
While it's important for companies to insure themselves against the loss of top executives, an increasing number, especially small- and medium-sized companies, buy into "key person coverage." This life insurance helps a company fulfill its business obligations in the event of the loss of an upper-level executive.
Key life insurance policies can be especially beneficial for smaller businesses when a company may not be able to succeed without the person.
The appropriate executive benefit plan varies based on the nature of the business, company goals and number of employees. There's no "one-size-fits-all" program; each is customized for the business's needs. Seeking the advice of a qualified expert helps owners develop an executive benefit plan tailored to their circumstances.
Many financial organizations, including banks, offer a range of financial services, serving as a great resource for information and products. Taking advantage of such one-stop shops ensures that benefit packages, insurance and other financial arrangements contribute to the long-term business plan, preserving and protecting a lifetime of work. Thomas W. Curry is vice president of executive benefit planning, Fifth Third Bank. Reach him at (614) 341-2603 or email@example.com.