Unlocking Employee Potential with Split Dollar Plans: A Strategic Approach for Small Business Success

Explore the strategic benefits of split-dollar life insurance plans for small businesses in our latest blog post. This article delves into how these plans can be a game-changer in attracting and retaining top talent. By offering life insurance benefits through a cost-effective loan arrangement, and businesses can enhance loyalty and ensure long-term commitment from key employees. Discover why split-dollar plans are essential for companies looking to stay competitive in today's dynamic talent market.


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In today’s dynamic business landscape, the quest to attract and retain top talent is more critical than ever. With global mobility and fierce competition for skilled professionals, offering unique and impactful benefits is no longer just an option—it's a necessity. Enter split-dollar life insurance plans, a tactical solution that blends employee loyalty with financial prudence.

The pursuit of exceptional talent in today’s market highlights the limitations of traditional benefits packages. To stay competitive, business owners are turning to innovative solutions like split-dollar plans to help secure and retain their most valuable employees.


Split dollar plans are a mutually beneficial agreement between employer and employee, centered around a life insurance policy. The employer pays the policy premiums, treating them as a loan to the employee, which is expected to be repaid through the policy's benefits. This approach provides substantial life insurance coverage for the employee at minimal immediate cost, while also allowing the employer to recoup these expenses overtime.


Key Components of Split Dollar Plans:

  • Loan Structure: Split Dollar arrangements can be structured initially as economic benefit arrangements, and then switched to loan status 10-12 years down the road.
  • Interest Rates: Loans accrue interest at or above the minimum rate set by the IRS, ensuring compliance.
  • Collateral Assignment: The policy serves as collateral, protecting the employer's financial investment.


The life insurance contract can also be structured as a NON-ERISA (discriminatory) fringe benefit or salary continuation program. The life insurance benefits are paid to the employee’s or executive’s beneficiaries of choice once the corporation has been paid back its premiums funded.


For example, a business investing $25,000 annually for a critical team member's policy over ten years. This $250,000 commitment, structured as a loan, demonstrates the employer's commitment to the employee's future. For the employer, it ensures a full return on investment through the policy's cash value or death benefit in case of the employee's departure or passing.

For the employee, it signifies the employer's confidence in their future, fostering stronger loyalty. The plan also provides additional benefits, such as non-taxable income for retirement, further enhancing its value.


Split-dollar plans provide a strategic edge for businesses looking to retain top talent. By offering significant benefits with minimal upfront costs and protecting employer interests, these plans serve as a wise investment in the company’s future. For business leaders, embracing innovative benefits is essential for attracting and retaining the talent necessary for success.

"Split dollar plans are a powerful tool for businesses seeking to differentiate themselves in the talent market. By offering substantial benefits with minimal immediate costs, these plans not only attract top talent but also demonstrate a long-term commitment to employee well-being."

– Michael Roberts, VP of Advanced Market at Fortis Lux Financial

Identifying businesses suited for split-dollar plans involves recognizing organizations that value long-term employee relationships and have the financial stability for such commitments. Here's a guide to consider.

  • Privately Held Corporations: Known for their close-knit leadership and growth-focused approach.
  • Family-Owned Businesses: Prioritize legacy and sustainable practices.
  • Startups and High-Growth Companies: Rely on core team expertise for expansion.
  • Professional Services Firms: Depend on key personnel for their continued success.
  • HNWI-Owned Businesses: Offer unique insights into investing in employee growth.


In conclusion, split-dollar plans are a strategic tool for businesses aiming to stay ahead in the competitive talent market. By providing valuable benefits with long-term financial advantages, these plans can help businesses secure and retain the exceptional talent they need to thrive.

This article is educational and is not advice or a recommendation for any specific product, strategy, or service. The views and opinions expressed are those of Michael Davila only. Any examples used are generic, hypothetical and for illustration purposes only. Securities and investment advisory services through qualified registered representatives of MML Investors Services, LLC. Member SIPC (www.SIPC.org). 420 Lexington Ave, 25th Floors, New York, NY, 10170. (212) 578-0300. Neither MML Investors Services, LLC nor any of its subsidiaries, employees or representatives are authorized to give legal or tax advice. Consult your own personal attorney legal or tax counsel for advice on specific legal and tax matters. CA Insurance License #0H91330