Executive bonus plans can boost employee retention by incentivizing key employees to stay. Offering a Section 162 executive bonus plan allows businesses to reward top performers without providing the same benefits to all employees. The business can pay life insurance premiums for executives and deduct the cost, while the income is taxable to the employee. To offset the tax burden, the bonus can be increased or the business can loan money for taxes. This system of "golden handcuffs" encourages executives to remain for long periods like retirement. The plans provide benefits like cash value that executives can use for retirement income or exchange for annuities.