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In California’s competitive hiring market, salary alone isn’t enough.
Top performers want:
- Long-term wealth building
- Tax efficiency
- Flexibility and control
👉 That’s why more companies in 2026 are using Section 162 Executive Bonus Plans—often paired with Indexed Universal Life (IUL)—to stand out.
🧠 What Is a Section 162 Executive Bonus Plan?
A Section 162 Executive Bonus Plan is a simple strategy that allows a business to:
👉 Give a tax-deductible bonus to a key employee or owner
👉 Who then uses that bonus to fund a personally owned life insurance policy
🔐 Why This Strategy Is So Popular in 2026
Compared to traditional retirement plans:
- No contribution limits
- No required employee participation
- No complex compliance (like ERISA rules)
👉 It’s selective, flexible, and powerful
⚙️ How It Works (Step-by-Step)
Step 1: Employer Pays Bonus
- Company gives a bonus (e.g., $20,000/year)
- Fully tax-deductible to the business
Step 2: Bonus Funds Life Insurance
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- Employee uses bonus to fund a policy (commonly IUL)
- Employee owns and controls the policy
Step 3: Taxes Are Managed Strategically
- Bonus is taxable income to employee
- Often structured with a “double bonus”:
- Extra funds to help cover taxes
👉 This is why it’s considered tax-advantaged, not tax-free upfront
Step 4: Policy Builds Wealth
Inside the policy:
- Tax-deferred growth
- 0% floor protection (no market loss)
- Cash value accumulation
Step 5: Tax-Free Income Potential
In retirement:
👉 Employee can access:
- Policy loans (generally tax-free if structured properly)
💰 Example Scenario
- Bonus: $25,000/year
- Double bonus covers taxes
- 10–15 year funding
👉 Potential outcome:
- Six-figure+ cash value
- Supplemental tax-free income
- Death benefit protection
🏦 Why California Businesses Love This Strategy
✅ Tax Deduction for the Business
- Reduces taxable income
✅ Attract & Retain Top Talent
- Unique benefit competitors may not offer
- Long-term incentive
✅ No Contribution Caps
- Unlike 401(k)s or qualified plans
✅ Selective Participation
- Only reward key employees (or yourself)
🚀 Advanced Strategy: Restricted Executive Bonus (REB)
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A Restricted Executive Bonus Plan (REB) adds:
- Vesting schedules
- Employer-imposed restrictions
- “Golden handcuffs” to retain talent
👉 Ideal for:
- High-level executives
- Long-term retention planning
🧠 Who Should Use This Strategy?
This works best for:
- Business owners
- High-income professionals
- Companies competing for top talent
- People maxing out traditional retirement plans
⚠️ Important Considerations
- Employee must qualify for life insurance
- Proper policy design is critical
- Work with tax and legal advisors
👉 Done right = powerful wealth strategy
👉 Done wrong = inefficient and costly
💡 Final Thoughts
In 2026, the best companies don’t just pay employees…
👉 They help them build wealth
A Section 162 Executive Bonus Plan:
✔ Rewards key people
✔ Creates tax-advantaged growth
✔ Differentiates your business
📲 Want to Implement This for Your Business?
If you’re a California business owner, this could be a game-changer.
👉 Text me at 714-867-7799 or call the office 714-893-7271
I’ll help you:
- Design the right plan
- Structure the bonus properly
- Show real projections
No pressure. Just clarity.