A salary continuation plan is an agreement between an employee and employer, whereby the employer agrees to continue the employee’s salary at retirement, death, or disability. The benefits are normally expressed in terms of a percentage of salary and length of service. It is usually done for key employees.
The ideal way to fund the plan is to purchase disability and life insurance policies on each employee involved in the plan. The employer applies for the insurance, pays for the premiums and is the beneficiary of the policy benefits. The employer can then address the policy benefits as they relate to each employee.
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