Section 162 Executive Bonus is a nonqualified benefit arrangement in which an employer pays a taxable bonus to an executive, who uses the funds to purchase and own a personal life insurance policy. The employer deducts the bonus as compensation under Section 162, while the executive gains personally owned coverage that can support family protection, retirement income, or estate-planning goals. Designs may include single or double bonuses, policy restrictions, and informal agreements that encourage retention without creating formal deferred-compensation plans.

Advisors propose Section 162 Executive Bonus arrangements for closely held businesses seeking flexible, simple executive benefits outside qualified-plan limits. They coordinate with attorneys and CPAs to document bonus terms, ownership and beneficiary designations, and any restricted-endorsement agreements. Employers appreciate the current tax deduction, while executives value owning and controlling the policy. Understanding Section 162 Executive Bonus plans helps advisors position them as easy-to-administer alternatives to complex nonqualified plans, especially for key people just below the top C-suite level.