Booking a consultation about a Section 162 executive bonus plan can feel like a bigger commitment than it actually is. You’re not signing anything, and you’re not obligated to move forward. A consultation is simply a working session to figure out whether this strategy fits your business, and if it does, what it would actually look like for the specific person or people you’re trying to reward or retain. Here’s a realistic walkthrough of how that conversation goes.

Before the Call: What to Have Ready

You don’t need a polished proposal, but a few pieces of information make the first conversation far more productive. Have a general sense of the executive’s or key employee’s age, approximate income, and role at the company. Know roughly how much the business could realistically commit annually to funding a benefit — this doesn’t need to be exact, but a range helps frame what’s possible. If you already have other executive benefits in place, such as a SERP or deferred compensation arrangement, jot those down too, since a new plan should complement what already exists rather than duplicate it.

Step 1: Understanding the Business Goal

The consultation typically starts with a conversation that has nothing to do with insurance products. What are you actually trying to accomplish? Retaining a specific employee who’s a flight risk? Rewarding performance without diluting equity? Building a benefits package that helps you compete for talent against larger companies? A section 162 bonus plan can serve several of these goals, but the plan design looks different depending on which one is the priority, so getting this clear upfront shapes everything that follows.

Step 2: Reviewing Who’s Eligible and Who You Want to Include

Unlike qualified retirement plans, a Section 162 plan doesn’t have to be offered to all employees, and there’s no IRS nondiscrimination testing to worry about. This flexibility is one of the strategy’s biggest selling points, but it also means the business needs to decide, in advance, who’s included and why. We’ll talk through whether this is for one key executive, a small leadership group, or a broader group of highly compensated employees, since that materially changes both plan design and total cost.

Step 3: Walking Through Bonus Structure Options

This is where the numbers start to take shape. We’ll discuss whether a standard single bonus (covering the premium only) or a double bonus (covering the premium plus an additional amount to offset the employee’s tax liability on the bonus) makes more sense given the business’s budget and the executive’s tax situation. We’ll also discuss whether the plan should include a restrictive endorsement — a REBA — that ties the employee’s access to policy cash value to a vesting schedule, which is common when retention, not just reward, is the primary goal.

Step 4: Discussing Policy Type and Preliminary Numbers

Based on the executive’s age, health, and the funding level you’re considering, we’ll talk through whether whole life, universal life, or indexed universal life is likely the better fit, along with rough premium ranges. This isn’t a formal underwriting process yet — it’s a preliminary conversation to make sure the numbers are realistic before anyone applies for coverage. If health history is a concern, we’ll talk through how that might affect pricing or insurability.

Step 5: Talking Through Tax Treatment

We’ll walk through, in plain terms, how the bonus is deductible to the business, how it’s taxable to the employee as W-2 income, and how a double bonus can help offset that. This is also the point where we’ll recommend looping in your CPA, since reasonable compensation questions — particularly for owner-employees — and the specifics of your business’s tax situation are best confirmed by the professional who prepares your return.

Step 6: Outlining Next Steps

If the strategy makes sense, the consultation ends with a clear roadmap: what underwriting will involve, what documentation needs to be drafted, what your CPA needs to weigh in on, and a realistic timeline for getting the policy in force. If it doesn’t make sense — sometimes it doesn’t, and a good advisor will tell you that — we’ll talk through what might be a better fit, whether that’s key person insurance, a different compensation strategy, or simply revisiting the idea once the business is in a different stage.

A first conversation about executive bonus life insurance usually takes 30 to 45 minutes, and most business owners leave with a much clearer picture of whether this is the right tool — and if so, what it would realistically cost and cover.

Frequently Asked Questions

Is there a cost to schedule a Section 162 consultation?

No. An initial consultation is typically a no-cost conversation to determine fit. You only move into formal underwriting and paperwork if you decide to proceed.

Do I need to bring financial statements to the first meeting?

Not usually. General figures — the executive’s approximate compensation and a rough sense of what the business can budget annually — are enough for an initial conversation. More detailed numbers come into play once you move toward formal plan design.

Should the executive or key employee be part of the consultation?

It depends on the business. Some owners prefer to explore the concept privately first before involving the employee; others include the executive from the start, particularly when retention and buy-in are the primary goal. Either approach works.

How long does it take to go from consultation to an active plan?

Once you decide to move forward, underwriting typically takes two to six weeks depending on the executive’s age, health, and the amount of coverage, followed by finalizing the bonus agreement and payroll setup.

What if we’re not sure this is the right strategy for us?

That’s exactly what the consultation is for. Part of the conversation is honestly assessing whether a Section 162 plan fits your goals, or whether an alternative — like a SERP, deferred comp, or a different insurance-based strategy — is a better match.

Can multiple executives be discussed in one consultation?

Yes. If you’re considering a plan for more than one key employee, we can walk through how design and cost might vary across the group in the same conversation.