Risk & Business Magazine CEO/CFO Business Today Magazine Summer 2018 | Page 29

GOLDEN HANDCUFFS
Golden Handcuffs
M
ost business owners and
executives have had a
bad dream of losing a key
employee to a competitor
— or having them leave to
start their own business by thinking (often
incorrectly) that “the grass is greener.”
Maybe this was not only a bad dream but a
reality.
Many of our clients have alleviated this
concern by creating an Executive Benefit
Plan that serves to attract the talent
needed as well as retaining key employees.
A “Golden Handcuffs” plan — officially
known as a nonqualified “Top Hat” plan —
can be selective and offered to only a few
key people, sometimes only one or two top
employees. The funds that are set aside to
provide the future benefit remain as an asset
of the company, so if the executive does not
stay long enough or meet the requirements
established for vesting, the assets simply
remain on the company balance sheet to be
used for other purposes.
BY: MARK SNIDER, CLU, CFP,
PRINCIPAL - SNIDER, FULLER AND STROH
Often, the funding vehicle used is a
corporate-owned life insurance (COLI)
policy, designed to accumulate cash at
competitive market returns while also
providing an immediate death benefit.
Typically, we will suggest splitting the death
benefit between the employee’s family and
the company. The payout to the company
is to provide key-person life insurance to
indemnify the company for the financial
loss caused by the death of a key employee.
If elected, a rider can be added for an early
payout of the policy death benefit if long-
term care services are needed. created a significant future cash benefit if
the employee stayed until retirement, at a
very manageable cost to the company.
We recently helped clients establish two
such plans with very different objectives.
One was to accumulate funds above the
401(k) maximum to allow the executive
to retire five years early at age 62. Another
plan was to reward three younger “next-
generation” executives by creating a
fund — in addition to the immediate life
insurance benefit — that built gradual
vesting over a long period of years. This An attorney and CPA with expertise in
Executive Benefits are key in creating and
maintaining a compliant plan. Properly
accounting for the plan on the company
balance sheet and tax return and keeping
up-to-date plan documents are all part of
having a successful plan. Contact us if the
idea of “Golden Handcuffs” for your key
employees is worth further discussion. +
The beauty of these plans is the flexibility.
As the employer, you determine:
•
• who to include in the plan,
• what the vesting period is for each
participant, and
• what products are most appropriate to
accomplish your goals.
what the benefit level is for each
participant,
Mark Snider is owner of Snider, Fuller and Stroh, a benefits firm located in Athens, Ohio. Mark moved to Athens to start his insurance career
in 1971. He has been active in his industry, serving as a past president of the Ohio Association of Life Underwriters, a national board member
of the Association of Health Insurance Agents, a life member of the Million Dollar Round Table and Top of the Table, and a board member
of the Hocking Valley Bank.
He has been active in many civic activities and has been a past president or board member of Athens Downtown Kiwanis, O’Bleness Memorial
Hospital, United Appeal, Rural Action, the 317 Board, and Athens Area Chamber of Commerce, twice being named as the Chamber Person
of the Year. In 2010, he was awarded the Ohio University Honorary Alumnus of the Year Award.
Mark is married to Rita and they have five daughters and six grandchildren.
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