What is an Executive Bonus Plan primarily designed for?

An Executive Bonus Plan is primarily designed to provide benefits that are owned by the executive, such as cash or insurance. This type of plan is often used as a tool to attract and retain top-level executives within an organization. By granting bonuses that the executive can control, the plan effectively aligns the interests of the executive with those of the company.

Under this plan, the employer pays a bonus that is typically used by the executive to purchase a life insurance policy or another asset. The benefit of this arrangement for the executive is that they have direct ownership of the policy or asset, which can serve as a financial security net or investment for their future. This ownership aspect distinguishes it from standard cash bonuses, making it an effective strategy to incentivize key personnel.

Additionally, the contributions made by the employer are generally tax-deductible for the company, making it beneficial from a tax perspective without primarily focusing on minimizing tax liability. However, the core purpose remains centered on providing valuable ownership benefits to the executive. Other options do not accurately capture the primary intent, as they either veer towards general employee incentives or focus on aspects not central to the Executive Bonus Plan itself.