Individual Retirement Bonus Plans (IRB)

For many small business owners, the contribution limitations of qualified retirement plans often make it difficult to accumulate substantial retirement savings for themselves and their other key executives.
Now there is a new nonqualified savings plan that helps address that problem. Great-West Retirement
Services® is introducing the Individual Retirement Bonus (IRB) product, a nonqualified plan with
similar features to a qualified retirement plan, but without some of the drawbacks. For example, the IRB
product has:
• No contribution limits
• No eligibility or participation requirements
• Business-friendly setup and implementation without complicated accounting, recordkeeping or
administrative requirements, in most cases
• No accrued liability on the company’s balance sheet
In addition, the IRB product provides tax-deferred growth of earnings on contributions and a selection of diversified investment options. Unlike traditional nonqualified deferred compensation plans, employer contributions to the IRB product may be deducted immediately and deferred amounts are not subject to the company’s creditors. For these reasons, pass-through tax entities such as S Corporations and LLCs may want to consider the IRB product as a solution for owners and key executives to save more for their retirement.

How Do They Work?
In an IRB, premium contributions are paid and allocated into the variable universal life insurance (VUL) investment accounts of the recipients’ choosing. The IRB plan investment options are similar to the employer’s 401(k) or 403(b) plan. The performance of the options is reflected in the insurance contract’s cash value. As for distributions, the preferred method is through tax-free withdrawals of the basis in the policy, then borrowing additional funds as needed. The loan is not taxed as long as the policy remains in force. Policies designed specifically for this market will usually charge and credit a similar interest rate on loaned funds. The institutional nature of the IRB VUL contract allows for high immediate cash surrender value, making the accumulation period much more understandable to the participant.