Bonus (Tax Exempt)
Principal® Bonus (Tax Exempt) is a simple and effective plan design to help employers of tax-exempt organizations recruit, reward, retain and retire key employees. It helps top talent increase their savings for the future, while helping their employer keep them for the long term.
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- Any non-governmental tax-exempt entity
- Employers who want to reward key employees who contribute most to the organization’s continued success
- Employers who want to help key employees save more for retirement
- Employers with adequate ongoing cash flow
Benefits and considerations for the employer
- Increase morale - It's an effective way to recruit, reward, retain and retire the employees who are most valuable to the organization.
- Enjoy simplicity - Avoid complexities and legislative impact of 457 plans.
- Communicate easily - Its simple and flexible plan design is easy to communicate and maintain.
- Save time - Business owners save time by not having to deal with annual reporting or ERISA requirements.
- Impact cash flow - Bonuses the business pays reduce company cash flow.
Benefits and considerations for the key employee
- Save more - More can be saved for retirement; above the limits of a qualified plan, such as a 401(k) or 403(b).
- Receive multiple benefits - In addition to retirement income, it provides access to funds to address unexpected events, such as disability, chronic illness and other financial needs.
- Enhanced financial security - The employee's family may receive tax-free benefits at his or her death.
- Owns the policy - The key employee owns the life insurance policy*, but must stay with the organization to be eligible for the bonus.
- Pay potential taxes - An additional tax may be due if the employer bonus doesn't cover all of the income tax. However, the tax on the bonus may be partially or fully offset with another employer bonus.
* Additional financing options may be available.
These success stories are designed to help you generate sales.
One retirement solution to help meet two needs (BB12181)
See how a nonprofit found a way to generate more retirement savings and boost retention efforts with one plan.
Key materials listed below.
Before the Sale
During the Sale
Sample Proposal (BB10079) | Request for Proposal (DD2230)
View a sample of a complete Bonus (Tax Exempt) proposal. Includes details on plan design, financial options, benefits, considerations and administrative services.
View Sample Proposal (PDF) | View Request for Proposal (DOC)
After the Sale
Use this summary with participants to explain the benefits of the plan and how it works. Choose from double bonus, single bonus or simulated deferral, and then customize it based on if the plan design includes a repayment obligation or restrictive agreement.
Sample Bonus (Tax Exempt) Agreement (BB11007)
A guide that contains some of the important issues to assist the client's attorneys with drafting the actual agreement.
Request and Agreement to Restrict Owner's Rights Form (BB6217)
Complete to place ownership restrictions on a life insurance policy.
Business Case Submission Checklist (DD849R)
Form that must be used when submitting Life applications to BMA to fund business solutions.
Compare Key Employee Benefit Plans for Tax-Exempt Organizations (BB10052)
Use this comparison matrix to help determine which plan design best meets the client's need.
Advanced Markets Information
Technical material for applied knowledge on a specific topic.
View Advanced Markets Information