Introduction to Death Benefit Only Plan
A Death Benefit Only Plan Agreement is also known as “group carves out plan.” Death benefit agreement is a plan agreement that provides the benefit to the family members of the employee in case of his/her death, named as his/her beneficiary on the agreement.
What Is the Death Benefit Only Plan Agreement?
A death benefit only plans agreement is a legal agreement signed between an employee and employer mentioning that in case of death of an employee, the employer will provide some benefit to the family members of the employee who is mentioned as a beneficiary on the agreement.
A death benefit plan agreement is taken by an employee from his/her employer.
What Is the Purpose of a Death Benefit Only Plan Agreement?
The main purpose of this agreement is to provide financial security to the family members of the employee in case of his/her death. The main purpose of this agreement is to provide financial security to the family members of the employee in case of his/her death. This agreement serves as a potential for avoiding federal estate tax on massive amounts of income to the employees’ survivors to any employee – including stockholder-employees, as long as they own 50 percent or less of the corporation’s stock.
Contents of a Death Benefit Only Plan Agreement
The following are some of the contents of this agreement;
- Name and address of the employer and employee
- Date of commencement of the agreement
- Duration of agreement
- Name and address of the Beneficiary
- Details of the terms and conditions
- Conditions for “Satisfaction of Claim”
- Amendments/Entire Agreement
- Details of Governing Law
- Details of “Non-Assignable Rights”
- “Contract of Employment” been Created
- Non-Secured Promise
- Details of “Limitations on Benefits”
- Details of “Claims Procedure”
How to Draft a Death Benefit Only Plan Agreement?
The process of drafting this agreement is provided below;
Mention
- The name and address of the employer and employee
- Date of commencement of the agreement
- Duration of the agreement
- Name and address of the beneficiary
- Details of the terms and conditions
- Conditions for “Satisfaction of Claim”
- Amendments (Entire Agreement)
- Details of Governing Law
- Details of “Limitations on Benefits”
- Details of “Claims Procedure”
The negotiation process of a death benefit plan agreement can not really be done as the benefits are provided to the employee from the employer in case of a death. Thus, an employee does not hold a right to negotiate such an agreement.
Benefits of a Death Benefit Only Plan Agreement
Benefits: This agreement provides financial security to the family members of the employee in case of his death. The benefits can be in terms of cash or kind.
Drawbacks: Though deemed beneficial to the beneficiary, it can sometimes be considered as a liability on the part of the employer.
What Happens in Case of Violation?
Generally, a Death Benefit Only Plan can be violated by an employer; in case he violates it, then the family members of the deceased employee can sue him. On the other hand, if the employee violates the agreement, then the employer can terminate the contract with an immediate effect.
DBO plans are deemed as alternatives or supplemental benefits that aim to attract, reward and retain key employees; as such, DBOs should be considered when designing a comprehensive executive benefit package
This agreement primarily aims at providing financial security for the beneficiary of the employee in case of his death. Most of the organizations these days seek to enter into this agreement to secure the future of the family members of the deceased employee.
[ Also Read: Employee Bonus Plan ]
Sample for Death Benefit Only Plan Agreement
You can Download the Free Death Benefit Only Plan Agreement customize it according to your needs and Print. This agreement is either in MS Word, Excel or in PDF.
