1. Does your small business client want to create a benefit for the business owner or for an employee?

Plan design and tax issues are often contingent on whether the individual receiving the benefit is an employee or has an ownership position in the company. Minority owners may fit into either category.

The term "employee" may encompass an employee, a contractor, an outside director, or any other service provider.

2. What's the business owner's primary concern?

2. Does your client want to offer a retirement benefit or a death benefit?

Some plan designs assume that the focus is employee death benefit while others focus on retirement income. To create the proper design we need to know the intent of the plan. A death benefit plan can provide either a tax-free or a taxable benefit, depending on the plan design. A retirement benefit plan can provide either taxable or tax-free income. Some plan designs pay a fixed amount for a specific number of years and other plan designs are flexible about amount and duration.

3. Does the company currently have a buy/sell arrangement in place?

3. Is your client's company an S-corporation (pass-through) or a C-Corporation?

Different types of business entities are taxed in different ways.

3. How will the plan be funded?

It's important to know and understand where the source of deferral is coming from so that the plan can be designed accordingly. Additionally, the funding source may have implications on payroll income taxes, W-2 adjustments, etc.

Based on your responses, a key person insurance plan may be right for your client.

With key person insurance, the business buys life insurance on a key employee. If the key person passes away, the business receives the policy's death benefit to help recover lost income or to cover costs while recruiting and training a new employee.

Based on your responses, an endorsement split dollar plan may be right for your client.

Under this type of arrangement, the business purchases and owns an insurance policy on the life of an employee. The business may recoup some of its investment when a valued employee separates from service, retires or dies.

4. Has the arrangement been reviewed recently to ensure that it still meets the client's objectives?

4. Who is in the higher tax bracket?

4. Does the employer want a current tax deduction or long-term cost recovery?

Based on your responses, a buy/sell arrangement may be right for your client.

A buy/sell arrangement can help protect the business in the event of the death of an owner.

Based on your responses, an insurance-based retirement plan (IBRP) may be right for your client.

An IBRP can be an added benefit to owners and non-owner employees so they can protect their families with life insurance while saving for retirement.

Based on your responses, a nonqualified deferred compensation (NQDC) plan may be right for your client.

This type of arrangement allows employees to save for retirement using either current compensation salary deferral, employer match contributions, or a combination of both.

5. Is the arrangement funded appropriately?

5. Does the employer want to define the contribution or the benefit?

The employer needs to determine if it wants to predefine annual contributions to the plan or predefine the benefit to be paid to the employee upon separation of service or another qualifying event.

Every buy/sell agreement is unique and should be reviewed annually as your client's needs may change.

Neither Nationwide nor its representatives provide tax or legal advice. We recommend your client consult with existing legal counsel to ensure that their objectives are being met.

Based on your responses, the collateral assignment split dollar plan may be right for your client.

Under this type of arrangement, the business loans money to an employee to pay premiums on a life insurance policy that the employee owns. The business may recoup some of its investment when a valued employee separates from service, retires or dies.

Based on your responses, an executive bonus plan may be right for your client.

Executive Bonus plans let small business owners offer bonus compensation that can be used to purchase a life insurance policy. Business owners have the flexibility to add a restriction to ensure that major changes aren't made to the policy without the business owner's consent.

Based on your responses, an executive bonus plan may be right for your client.

Executive bonus plans let small business owners offer their employees a bonus in the form of a life insurance policy that the business pays for directly. They can add a restriction to ensure that major changes aren't made to the policy without the business owner's consent.

Based on your responses, a buy/sell arrangement may be right for your client.

A buy/sell arrangement is one way to protect a small business against the risk of the death of an owner. Although establishing an appropriate agreement is crucial, ensuring that the agreement is properly funded is just as important. Without adequate funding in place, the business runs the risk of not having the money to execute the agreement.

Buy/sell funding arrangements should be reviewed on an annual basis.

Based on your responses, a defined contribution supplemental executive retirement plan (SERP) may be right for your client.

A defined contribution SERP allows employers to make retirement contributions to an account earmarked for a key employee. At retirement the employee receives payments based on the current account value.

Based on your responses, a defined benefit supplemental executive retirement plan (SERP) may be right for your client.

A defined benefit SERP allows employers to make retirement contributions to an account earmarked for a key employee. At retirement the employee receives payments based on a predefined benefit amount.