Bonus - S Owner
Principal® Bonus - S Owner is a plan designed to meet the needs of S corporation owners who want to ensure they have enough income for retirement.
This bonus plan provides death benefit protection and tax leverage without contribution limits or restrictions on compensation. The tax leverage comes with using life insurance to finance the plan, rather than it being based on a tax code provision.
This content is designed for use by financial professionals. Consumers may learn more about products and services on principal.com.
Owners of S corporations:
- Seeking to move capital from their business to their personal assets
- Offering nonqualified benefits to non-owners (through nonqualified deferred compensation, executive bonus, or split dollar plan) who also want a benefit for themselves
- Who have accumulated previously taxed income in their S corporation and are seeking to use additional wealth for personal retirement and death protection needs
- Save more - While qualified plans and Roth IRAs offer tax benefits, they have limits on compensation and contributions that don't apply to this plan. *
- Choose from contribution options - S corp owners can choose to take income as compensation or a K-1 distribution, allowing some payroll tax leverage.
- Pay out distributions properly - If there's more than one owner, and K-1 contributions are used, distributions need to be in proportion to ownership.
- Pay income tax now - Whether profits are distributed or retained for business expansion, owners are taxed at current ordinary income tax rates.
- Need to be healthy - Owners must be able to qualify for life insurance if chosen as the financing option.
- Choose alternate financing options - If any owner is unable to qualify for life insurance, other options for financing the plan are available. But these options will have different tax implications regarding accumulation and distribution.
* Contributions must meet reasonable compensation regulations.
Before the Sale
During the Sale
Sample Proposal (BB10077) | Request for Proposal (DD2232)
A customized Bonus - S Owner Proposal, with appropriate client cover information and illustration, can be created by the Business and Advanced Solutions Case Design team by using the Request for Proposal document (DD2232).
View Sample Proposal (PDF) • View Request for Proposal (DOC)
Financial Models: Shows a sample of the financial model and illustration.
- Sample Bonus - S Owner Financial Model (BB10077VUL)
After the Sale
BMA Services Flyer (BB9441)
Outlines the added benefits employers and plan participants get from our administrative services through Business Market Administration (BMA).
Note: Sample agreements not necessary because Bonus - S Owner plans are implemented by and for the owners of businesses.