Insurance policies covering a company’s pension obligations

If the company is the beneficiary under the policy, the
tax deductible current expense is the premium plus the actuarially calculated
annual accrual minus the increase in the adjusted surrender value of the policy.
There is no immediate tax effect on the employee. If the employee is the
beneficiary, the premium payment is treated as an employee cash benefit.
Rather more recently, deferral schemes to commute salary increases and future
bonus or other discretionary payments to retirement benefits have gained in
popularity. These schemes are often backed by a pension fund.

Provided the
prescribed formalities and limitations are observed, the annual expense is
deductible for the company, but the income is not taxable by the employee
until receipt.