Which of the following best describes the benefit structure of an executive bonus?

An executive bonus is a type of compensation arrangement where the employer pays premiums for a life insurance policy or an investment plan on behalf of a highly compensated employee. This allows the employee to enjoy the benefits of the policy while the employer takes care of the premium costs. The structure is advantageous for both parties; the employer can provide an incentive to retain talent and the employee receives a valuable benefit without directly incurring its costs.

In contrast, while a lump sum payment to the employee may occur in other bonus structures, an executive bonus specifically centers on the premium payment made by the employer. Similarly, while tax considerations and performance measurements are relevant in discussions about employee compensation, they do not specifically define the essence of the executive bonus arrangement as clearly as the employer-funded premium does. This premium payment is the distinguishing feature that characterizes the executive bonus as a method of rewarding and incentivizing valuable employees.