Page 307 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Chapter 6. Employee Benefits and Perquisites 293

Age Multiple Age Multiple

Under 25 5.00 50 2.50
26 4.90 51 2.40
27 4.80 52 2.30
28 4.70 53 2.20
29 4.60 54 2.10
30 4.50 55 2.00
31 4.40 56 1.90
32 4.30 57 1.80
33 4.20 58 1.70
34 4.10 59 1.60
35 4.00 60 1.50
36 3.90 61 1.40
37 3.80 62 1.30
38 3.70 63 1.20
39 3.60 64 1.10
40 3.50 65 1.00
41 3.40 66 0.90
42 3.30 67 0.80
43 3.20 68 0.70
44 3.10 69 0.60
45 3.00 70 0.50
46 2.90 71 0.40
47 2.80 72 0.30
48 2.70 73 0.20
49 2.60 74 and over 0.10
Table 6-17. Insurance coverage by age

assume that these have not significantly changed during this three-year period. Three times
salary-plus-bonus coverage under company A might mean being slightly underinsured in
years 1 and 3 or, if these amounts are consistent with need, being overinsured in year 2.
Which of these two conditions was true would determine whether three or four times salary
under company B would be more appropriate.

Premium Waiver. Basic life insurance may be fully paid by the company, or the employee
may absorb a portion of the expense. Where the latter is true, it is common to have a waiver
of premium (while continuing coverage) if the employee becomes disabled. While the com-
pany receives a deduction on its premium expense, as stated in Section 79 of the IRC, the
individual receives the first $50,000 of coverage purchased by the company free of income tax
liability. After that point, income is imputed in accordance with rates prescribed by the IRS.
Usually, these rates are less than charged by the insurance company and, therefore, advanta-
geous to the executive. However, the reverse may not be true if the actual premium paid is
less than the IRS table. Logically, one would argue that the lower premium rates be used