Another nonqualified plan in which the employer helps the employee purchase life insurance protection is a Section 162 bonus plan. Unlike the split-dollar plan, in this plan the employer does not recover its premium payments at plan termination. The policy is owned by the employee and when the employer pays the premium, the employee must include the entire amount in their income. If this amount is considered to be reasonable, the employer can deduct the premium as a compensation expense. A business owner may be more willing to establish a bonus plan because of this tax advantage and because it is much easier to set up and administer than a split-dollar plan.

The employer may want to go one step further and provide the employee with the additional cash needed to pay the tax on the bonus. This arrangement is referred to as the double bonus plan. In this situation, the employee would receive the original premium, the tax on the premium and the tax on the tax, as the full bonus amount.

If the employee is not an owner of the business, the employer may want to place a "golden handcuff" on the plan. This arrangement is referred to as the restricted bonus plan. In this situation, the employer attaches a special endorsement on the policy to prevent the employee's access to the cash value until a specific period of time. A typical arrangement would be to provide the employee access after several years of continuous service.