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The Death Benefit Only Program

BY Lawrence L. Bell
January 31, 2014

The Death Benefit Only (DBO) program provides non-qualified deferred compensation, and death benefits. The DBO program can be used by employers without regard to corporate and qualified plan limitations and may be provided by employers on a permissibly discriminatory basis. The DBO program, when structured properly, can accept elective or non-elective contributions on an individual employee basis. The benefits can also be used as Golden Handcuffs to retain valued employees.

Structure of'The DBO Program

The DBO Program' can be applied to an existing deferred compensation plan as well as new wealth accumulation plan. This approach will be flexible to the employer and largely estate and income tax free to the covered employee. The accrued benefit to the employee can be safeguarded from claims of creditors of the employer and employees and upon withdrawal by the employee can be accessed in an economically efficient manner. The death benefit need not be an asset on the books of the practice or subject to the claims of creditors. Additionally, the employer can institute The DBO Program as a new benefit plan and fund “as you go” rather than creating a liability for employer needs. The DBO Program alternatively, may be reflected as an asset on the practice's books for audit accounting purposes and not create a charge to earnings. This tool complies with both GAAP accounting as well as IAS 19.

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