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Collateral assignment split-dollar (CASD) plans, where key personnel receive ownership of a life insurance policy the premiums for which are paid by the employer, but are repaid to it as interest-bearing loans, and until repaid such loans are collateralized by the insurance policy.

CASD plans achieve incentive/retention objectives, enable the employer to recover the cost of the plan, if properly structured are tax-free to the executive and also avoid the 21% employer-side excise tax on certain compensation paid to a tax-exempt organization’s most highly compensated employees, and place the financial risk of underperformance of the plan-funding insurance policy on the executive rather than the employer, whose only legal obligation is to advance the agreed premiums rather than guaranteeing a specific retirement benefit amount.

Split-dollar executive compensation plans: Doing it right | BenefitsPRO Collateral assignment split-dollar plans offer a unique incentive to retain top company execs.