Do you understand the difference between an Executive Bonus Plan and a SERP? Do you know when to recommend one over another? The experts at Principal do. They live and breath it every day, and are only a phone call away. Making them a part of your “back office” for case design is a great play, because let’s face it, unless you have taken the time to research and understand this platform, you don’t know BOES.


The Sale

Recruiting new talent is only one part of the equation when putting together a talented team. The other is incentivizing existing top performers to stay, and that small nuance can make all the difference in designing an effective incentive package. In the case of a SERP, the assets stay with the company, and if the employee wants to realize the benefits, they need to stick around! Of course, there is much more than this one nuance to the design process, which is why the Principal’s BOES experts and the Principal SERP Select are so powerful: The BGA and the producer don’t need to be the expert, they just need to KNOW the expert. If you want to know enough to be dangerous, read on to find out how a SERP works and check out the suite of resources Principal can deploy to help you close your next case.

The Process

After establishing a defined contribution deferred compensation agreement with the key employee(s) they select, the employer determines how much they want to contribute to the plan (employer contributions only).  Life insurance is used to help finance the plan.

SERP Select

Then, upon a triggering event, such as separation from service, retirement, death or disability, a vested payout to the key employee may begin.  Dollars to complete the payout may come from company cash flow, distributions from the life insurance policy or transfer of ownership of the life insurance policy.

Benefits to the Employer:

  • Effective method to recruit, reward and retain key employees
  • Employer may deduct the benefits paid to the key employee(s) at any distribution event
  • Tax-efficient life insurance can be an effective way to finance benefits to select employees
  • Complimentary Administrative Services offered through The Principal

Target Markets

This plan is designed for:

  • C corporations (owners and key employees)
  • S corporations, limited liability companies (LLCs) or partnerships (key employees only)
  • Businesses with strong continuity in place
  • Financially stable businesses (profitable, good cash flow, long history)
  • Owners wanting to benefit one to five key employees
  • Annual contributions of $25,000 – $150,000

This plan is NOT designed for:

  • Not-for-profit organizations
  • Owners of S corporations, LLCs or partnerships
  • Larger cases or situations where the employer is looking for greater flexibility in case design and more robust administrative services

The Fact Finder and Plan Design

Plan design is a breeze, when you work with The Principal®. Just complete this Request for Proposal and the plan will be designed to your client’s specifications, including not only an illustration, but also a financial model.

The Product

The Principal® offers a variety of competitive life insurance products for the executive benefits market. Whether your clients are looking for fixed or variable products, The Principal Financial Group has it all.  A product that works particularly well for this plan design is The Principal Variable Universal Life (VUL) – Business. It offers high early cash value that can be beneficial in these scenarios.

The Underwriting

  • Have a willing buyer? Use Accelerated Underwriting to get the case through quickly for face amounts of $1MM or less.
  • What about multi-life underwriting?  The Principal® offers Guaranteed Issue and Simplified Issue as well as other competitive options.

The Administration

Even the smallest SERP case can benefit from the robust reporting that is part of the ongoing administration Principal offers in this space. Learn from the pros at Principal why their no-cost business administrative services platform is a critical part of working in this market space.  Then, share with your clients, why you should leave the “administrative services details” to The Principal®

The Training and Resources

While there is a ton of information in this email, there is much, much more to the Executive Bonus story, from The Principal®.  See below for more training resources on Executive Bonus Plus and the BOES Platform: