Slide 1

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 2

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 3

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 4

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 5

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 6

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 7

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 8

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 9

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 10

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 11

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 12

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 13

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 14

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 15

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 16

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 17

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 18

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 19

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 20

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 21

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 22

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 23

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 24

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 25

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 26

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 27

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 28

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 29

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 30

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 31

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 32

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 33

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 34

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 35

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 36

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 37

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 38

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 39

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 40

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316


Slide 41

Executive Benefits Planning
Reward and retain key executives

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

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

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Today’s competitive business
environment

 Business owners today are faced with
increased competition for talented key
executives
 Traditional compensation strategies fail:
–Short-lived impact
–Tax law changes

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive benefits objectives

 Executives want to:
–Reduce tax burden and defer taxation of income
until the income is actually needed

 Employers want to:
–Provide executives with incentives to remain with
the company

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Uses for nonqualified plans
Nonqualified plans can be used:
 To recruit, retain, and reward key Executives
 To counter “reverse-discrimination”
 To provide income tax-deferral for Executives
 To act as “Golden Handcuffs”

 To recruit, retain, and reward outside board members

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Nonqualified plans are flexible
 Qualified Plans:
–
–
–
–

Contribution limits
Must be non-discriminatory
Funding & reporting requirements
Penalties for early distributions

 Nonqualified Plans:
–
–
–
–

No contribution limits
Can be offered selectively
Minimal reporting requirements
No penalties for early distributions

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Customize NQDC plans

Select Plan Design Based on Mutually Desired Features

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Alternative plan designs
 NQDC or SERP Arrangements
 Split Dollar Loan Arrangements

 NQDC/Split Dollar Combo Arrangements
 Endorsement Split Dollar Arrangements
 Survivor Income DBO Arrangements
 Executive Bonus (§ 162) Arrangements
 Restricted Executive Bonus Arrangements (REBAs)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Factors to consider
 Deferral of Income Taxation

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction
 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income

Death Benefits

 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations

 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”

Death Benefits
 Cost Recovery
 ERISA or “Top Hat” Limitations
 Ease of Administration

 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

Factors to consider
 Deferral of Income Taxation

 Flexibility

 Current Tax Deduction

 Income Tax-Free

 Supplemental Retirement Income
 Protection from
Employer’s Creditors
 “Golden Handcuffs”
 Income Tax-Free
Retirement Distributions*

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Death Benefits
 Cost Recovery

 ERISA or “Top Hat” Limitations
 Ease of Administration
 Balance Sheet Impact
*Income tax free distributions are achieved by withdrawing to
the cost basis (premiums paid) then using policy loans. Loans
and withdrawals may generate an income tax liability, reduce
available cash value and reduce the death benefit or cause
the policy to lapse.

NQDC & SERP Arrangements
 Employer promises Executive future
benefit (defined contribution or
defined benefit)
 Employer informally funds promise
by purchasing life insurance policy
on Executive
 At retirement, or at death, Executive
receives promised benefit
 Arrangement is subject to IRC § 409A

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

NQDC & SERP Arrangements

1
NQDC or SERP
Agreement

Employer

2

3

5
4

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

NQDC & SERP Arrangements
Advantages

Disadvantages

 Tax deferral for Executive

 Subject to § 409A rules

 Provides source of supplemental

 Retirement benefits subject to
income taxes

retirement income
 “Golden Handcuffs”
 Cost recovery available
to Employer

* The parties could use a split-dollar arrangement
to make the death benefits income tax-free.
However, economic benefits of the arrangement
would create a current tax liability.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Funding asset is subject to claims
of Employer’s creditors

 Timing of payments must be
“fixed” when plan is adopted;
no flexibility
 Death benefit paid to Executive’s
survivors subject to income tax*
 Subject to ERISA
“Top Hat” limitations

Split Dollar Loan Arrangements
 Executive purchases life
insurance policy
 Employer pays policy premiums
and retains collateral assignment
 At retirement, Executive
reimburses Employer for
premiums paid

 Policy’s cash values available to
Executive as supplemental
retirement income

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements

Employer

1
Split Dollar Agreement

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Split Dollar Loan Arrangements
Advantages

Disadvantages

 May provide a source of
supplemental retirement income

 Imputed Interest taxed as income
to Executive

 Not subject to claims of
Employer’s creditors

 Limited cost recovery available
to Employer

 Tax-preferred retirement benefits

 Flexibility on timing
of distributions
 Death benefit not taxable
as income*
 Not subject to ERISA
“Top Hat” rules

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

*Proceeds from a life insurance policy are
generally income tax-free.

Endorsement Split Dollar Plans
 Employer promises benefit to Executive’s
survivors upon his or her death
 Employer purchases Life Insurance to
fund promised benefit
 Executive taxed annually on “economic
benefit” or “term costs”
 Death benefit is received by Executive’s
beneficiaries income tax-free*

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Endorsement Split Dollar Plans

1
Employer

2

Split Dollar Agreement

Executive

2

3
3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

IRS

Endorsement Split Dollar Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Avoids ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing

 Simple plan administration
 Death benefit received
by Executive’s survivors
income tax-free*
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

 Employer promises benefit to
Executive’s survivors upon his
or her death
 Employer purchases
Life Insurance to fund
promised benefit

 Death benefit is taxable to
Executive’s beneficiaries as
Income in Respect
of a Decedent (“IRD”)

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Survivor Income DBO Plans

1
Employer

DBO Agreement

4
2

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive

Survivor Income DBO Plans
Advantages

Disadvantages

 Cost recovery available
to Employer

 No supplemental retirement
income provided

 Not subject to ERISA and
“Top-Hat” limitations

 No “Golden Handcuffing”

 Simple plan administration

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

 Death benefit paid to Executive’s
survivors is taxable income

Executive Bonus Plan
 Employer makes premium
payments on cash value
life insurance policy owned
by Executive
 Premium Payments treated as
taxable income to Executive
 Executive uses policy as
source of retirement
supplemental income
 Policy provides Executive
a death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan

Employer

1

Executive

2

4

3

Voya Life Companies

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Bonus Plan
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No “golden handcuffs”

 Supplemental retirement income

 No cost recovery available
to Employer

 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to
Employer’s creditors

* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)
 Employer makes taxable premium
payments on cash value life
insurance policy owned
by Executive
 Premium payments treated as
taxable income to Executive

 Employer and Executive execute
restrictive endorsement to policy
 Executive uses policy as source of
supplemental retirement income
 Policy provides Executive a
death benefit

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Restricted Executive Bonus Arrangement (REBA)

1

Employer

Executive

2

5

4
Restrictive
Endorsement

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

3

Voya Life Companies

Restricted Executive Bonus Arrangement (REBA)
Advantages

Disadvantages

 Not subject to ERISA

 Immediate taxation to Executive

 Not subject to NQDC rules

 No cost recovery available
to Employer

 Supplemental retirement benefits

 “Golden Handcuffs”
 Flexibility on timing of payments
 Death benefit not taxable
as income*
 Not subject to Employer’s creditors
* Proceeds from an insurance policy are generally income tax free, and if properly structured, may also be free from
estate tax.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

The Executive Benefits Wizard
can help identify a plan
design that works for you.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Executive Benefits Wizard

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316

Your Voya representative can show
how these ideas might work for you.

Ask for a proposal customized to
fit your situation.

©2014 Voya Services Company. All rights reserved. CN0317-8764-0316