38 Salary Continuation. Learn How You Can Keep the People Most Responsible for Your Profitability

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1 38 Salary Continuation Learn How You Can Keep the People Most Responsible for Your Profitability How do you get your best people to remain with your company until they retire? The ones responsible for your competitive advantage and the profitability of your business What can you do to keep your most valuable people from being hired away by your competitors? You certainly want these people to know that you value and appreciate their talents, skills and experience but you also want to give them a financial incentive to remain with your company until they retire. The problem is giving them something they really need

2 something important to their financial security but something they can't take with them if they leave you. So what's the solution? A Salary Continuation plan. It's a simple agreement between your business and your key people. A guarantee or assurance that they will continue to receive a regular monthly salary for a specified number of years after they retire or if they are unable to work at any time [because of a] heart attack / [or] cancer / [or] traffic accident even if it results in their death or permanent disability. A Salary Continuation plan is a deferred but conditional incentive because they can only receive this retirement salary if they stay with your company until the age or year

3 specified in the agreement. And if they leave they forfeit all the benefits. [what's more] it's a low cost supplement or enhancement to their current compensation with little or no impact to your balance sheet because all the benefits are insured and paid out with tax free proceeds. Here's how it works: With a Salary Continuation plan you choose the participants you select the benefits and you control the funding. The plan agreement is drafted by your attorney and the benefits are secured through your insurance advisor. There is no regulatory compliance or reporting [and] no administrative fees or expenses. A Salary Continuation plan can be set up for any size company with almost any budget

4 and for as few or as many people as you choose to include. Benefits can be set up differently for each person and can even be based on performance or productivity. Your business receives the insurance proceeds tax free and takes a tax deduction for salaries paid out. And because all the benefits are insured all the expenses can be recovered tax free. [for example] Matt and Chris were partners in a medical supply distribution business. In addition to themselves they had 3 key people working for them. Melanie their office manager Roger their warehouse manager [and] Jerry their sales manager.

5 A few years after installing their Salary Continuation plan which also included both partners Melanie was injured in a car accident and was unable to work for almost 2 years. During that period the company received $ 7,000 a month - tax free which they paid to her as a tax deductible salary while they used her regular salary to hire a replacement until Melanie returned to work. Years later - at age 58 Jerry had a heart attack and died on the way to the hospital. The company received $ 1,000,000 tax free which it used to pay Jerry's widow $ 7,000 each month for 10 years

6 which left the business with $160,000 to reimburse itself for the cost of the insurance. [then] At age 65 Roger retired and the company withdrew $ 7,000 a month from the plan tax free which they paid to him over the next 20 years. Which meant that Roger received a total payout of $1,680,000 all of which was tax deductible to the business and funded entirely by the insurance coverage. So ask yourself this... Does it make sense to risk losing the people responsible for the success and profitability of your business to one of your competitors? [and] Does it make sense to pay out all their compensation in current salary and bonus?

7 Without any incentive or deferred reward for years of service performance and productivity? Or does it make better sense to set up a Salary Continuation plan? to guarantee these people a retirement income and their families a regular monthly paycheck but only if they stay with you until they retire and don't ever compete with you especially if the benefits can be insured and all the costs can be recovered?