Instead of treating executive/employee compensation purely as W-2 wages (a taxable expense), a portion is structured as a loan from the employer to the employee.

The loaned amount is deposited into a specially designed permanent life insurance policy in the employee’s name.

Because the transaction is treated as a loan, not income, the employee pays significantly less in federal, state, and local income taxes.

The employer reduces payroll tax obligations and may also reduce or eliminate excise taxes on executive compensation.

The strategy requires a minimum five-year participation period, creating a “golden handcuff” that encourages employee loyalty.