New York Split-Dollar Insurance Agreement with Policy Owned Jointly by Employer and Employee

• Category: Insurance - Contracts
• State: Multi-State
• Control #: US-1086BG
• Format: Word; Rich Text

Description

In a split-dollar plan, an employer and employee execute a written agreement that outlines how they will share the premium cost, cash value and death benefit of a permanent life insurance policy. Split-dollar plans are frequently used by employers to provide supplemental benefits for executives and/or to help retain key employees. The agreement outlines what the employee needs to accomplish, how long the plan will stay in effect and how the plan will be terminated. It also includes provisions that restrict or end benefits if the employee decides to terminate employment or does not achieve agreed-upon performance metrics.

New York Split-Dollar Insurance Agreement with Policy Owned Jointly by Employer and Employee: A Comprehensive Overview Introduction: In New York, a split-dollar insurance agreement with a policy jointly owned by an employer and employee offers a unique way to structure life insurance benefits. This arrangement is often used as an executive compensation tool, allowing employers to provide valuable benefits while retaining some control over the policy. In this detailed description, we will explore the key aspects, benefits, and different types of New York split-dollar insurance agreements with policies jointly owned by employers and employees. Key Elements of a New York Split-Dollar Insurance Agreement: 1. Joint Policy Ownership: Unlike traditional life insurance policies, split-dollar insurance agreements entail joint ownership between the employer and employee. Both parties have a vested interest in the policy, which helps define the agreement's terms. 2. Premiums and Ownership Split: The agreement stipulates how premiums will be paid and allocated between the employer and employee. Typically, the employer pays a portion of the premium, while the employee is responsible for the remaining balance. The ownership split might be 50/50 or any other agreed-upon proportion. 3. Death Benefit Allocation: The allocation of the death benefit can be structured in various ways. It may be predetermined, based on a formula, or tied to certain milestones and can be modified by the agreement terms. 4. Employers Collateral Interest: To secure their premium contributions and protect their investment, employers often take a collateral interest in the policy's cash value. This ensures that their payments are recoverable if the arrangement terminates before the insured employee's death. Benefits of New York Split-Dollar Insurance Agreements: 1. Competitive Employee Benefits: Split-dollar insurance agreements provide powerful benefits to employees, making them an attractive compensation tool. These agreements can supplement employees' retirement savings, provide death benefit protection, and serve as a key retention tool. 2. Tax Advantages: Split-dollar life insurance arrangements offer favorable tax treatment. Employers can deduct their premium contributions, while employees generally do not face immediate income tax consequences. 3. Flexibility and Customization: Split-dollar insurance agreements can be tailored to meet the specific needs of both employers and employees. The joint ownership structure allows for flexibility in policy design, premium payment schedules, and policy termination options. Different Types of New York Split-Dollar Insurance Agreements: 1. Equity Split-Dollar: This type of split-dollar arrangement focuses on providing the employee with potential equity in the policy's cash value growth. The employee assumes the responsibility of paying for the pure insurance costs, while the employer funds the equity portion. 2. Endorsement Split-Dollar: In endorsement split-dollar agreements, the employer endorses the policy, providing the employee with access to additional insurance coverage. This endorsement can be utilized to protect a key employee or enhance executive compensation. 3. Loan Regime Split-Dollar: This type of split-dollar arrangement incorporates loan provisions, allowing employers to recoup their premium contributions by lending funds to the employee. The loan is repaid either with policy proceeds or via other pre-determined methods. Conclusion: New York split-dollar insurance agreements with policies owned jointly by employers and employees offer a flexible and beneficial mechanism for structuring executive compensation and providing attractive employee benefits. With various types of split-dollar arrangements available, employers can customize their agreements to align with their objectives and meet employees' specific needs. Seeking guidance from insurance and legal professionals is crucial to establish a well-structured and compliant New York split-dollar insurance agreement.