This apparently, is a non-qualified plan.

There are variants of the premium financing used in estate planning that are being used in the key employee - executive benefits marketplace. You may be looking at one of them.

Elective Deferral Alternative ... The core concept is the executive owns an institutionally priced life insurance policy (ILI) and makes contributions on an after-tax basis (supplemental Roth alternative). The executive can increase the contribution through a premium loan at LIBOR plus _%.

SERP Alternative ... The company can be making bonuses in the traditional bonus 162 variants and again the executive has the option to increase the contribution through a premium loan.

The key to these alternatives is ILI has become so efficient ... key employees are living so long and ILI mortality is so cheap ... its more effective today for the executive to own the asset for life rather than be an unsecured creditor during their employment. If the employer has costs or is making contributions it can still buy ILI for COLI cost recovery purposes. So you end up with the key employee owning the benefit asset and the employer owning a cost recovery asset.

On a non-leverage basis the executive has greater cash accumulation value on a secured personally owned basis plus some extra life insurance protection at $0 incremental cost, the company has converted to a simple bonus structure and typically not dealing with 409A issues, the company can optionally buy ILI for cost-recovery while reducing its cash flow to deliver the same value. And if the executive wants to premium finance some extra contribution capacity, that's their option.

All of my plans are non-leveraged. I'm in the mid-west and our employers are conservative and uncomfortable putting their name behind an employer facilitated leveraged program.

More and more you are seeing recommendations for employers to get out of the old "Top Hat" structure and move to an executive owned ILI structure. Better economics for both the employee and the employer, no 409A issues and greater flexibility to address the financial parity issue employers have that can't be solved with the Top Hat structure ... ILI is available to the top 35% vs. Top Hat plans for the top 5%-7%. And because the key employee owns the funding vehicle, any employer can deliver parity to their key people ... parity is no longer a C-corp perk.

So, not a revolutionary move, but an evolutionary move ... it was only a matter of time that key employees would be living so long that it would be more efficient to structure the programs on an employee owned basis ... and that change happened in 2002.

Mark

The term is almost meaningless and could be applied to many variants of plans that use employer paid premiums etc.

Is there any further info?

The nomenclature more than likely applies to an "executive bonus" plan, not a form of deferred compensation but a method for an employer to pay life insurance premiums and then include the premium amounts on form W-2 as a bonus. A "double bonus" plan refers to a similar arrangement where the employer not only pays the premium but also gives the employee enough additional compensation (bonus) to pay the taxes on the life insurance premium and bonus which are taxed to the executive.
This type of arrangement is not subject to 409A.

Or may be referring to Peachtree's Leveraged Bonus Plan. www.peachtreelbp.com Premium financing the tax hit on a bonus 162 plan.

When I hear leveraged, I wonder if there are Sarbanes issues with a company potentially being construed as indirectly arranging for a loan.

Not that I've head so far as the decision of exercise a premium financing loan is a personal transaction / option between the individual and the product vendor. The company is not pledging assets or doing anything special for those that choose to add the loan option or not.

With regard to Peachtree in particular, How can it be between the individual and the vendor, when the product is being sold to the business ?

I cannot recall seeing any of these leveraged and/or finaced products that were not targeted at the business just like the Peachtree LBP SERP Rescue.

The concept is being sold to the business, but the product is owned by the individual.

Their SERP rescue appears to be ... terminate the SERP, terminate the COLI or whatever is the informal funding, bonus the cash into employee owned life insurance and the individual executes a loan from them to offset the tax impact of the bonus. Convert your ongoing SERP contributions into a bonus 162 plan with loan.

Same appears with their 401(k) Enhancement. Rather than the employer setting-up a pre-tax deferral plan under 409A, employer facilitates the employee buying life insuance with after-tax dollars and the employee executes a loan from Peachtree for the tax impact.

At least that's my interpretation of the very sketchy information / case studies they have on their site.