Making Heads Or Tails Of Executive Benefits

A simple coin toss is the most popular form of settling disputes or making decisions. Subterfuge is often used to improve a participant’s odds. If the caller sees through the “heads-I-win/tails-you-lose” ploy then the flipper can introduce a GMO known as a two-headed coin, usually a Washington quarter, available for a few bucks at any novelty store.

All this to illustrate that, for all the similarity of circumstances that the obverse and the reverse have on the dime, they can dictate significantly diverse patterns of events. We use the phrase two sides of the same coin to describe the different, but closely related features, of an idea or course of action. And so it is with certain non-qualified executive benefits.

Their primary difference is the amount of control the employer has – should the executive choose to leave. Both are easy to explain, implement and administer.

With an EB plan, simply put, the employer pays for the executive’s personal insurance coverage. In a DBO plan the employer promises to pay a benefit to a named beneficiary if the executive dies while employed, then buys a company-owned policy to fund against the contingency. In either case the vehicle can be a permanent or term product.

Often with a DBO the employer chooses to roll the policy out to the executive at the time of retirement. Even with term coverage the conversion privileges can make the transfer attractive if the executive has had health issues.