Nonqualified Deferred Compensation Plans and the Top Hat Exemption
Nonqualified deferred compensation plans (NQDCPs) are effective, flexible tools to help recruit, reward and retain top talent. Employers determine who participates in these plans, the amount of plan benefits, the timing of when benefits can be received and the vesting schedule applied to any employer contributions. Participants’ account balances grow tax-deferred, and they can choose […]
Using a Rabbi Trust to Protect Nonqualified Deferred Compensation Plan Participant Benefits
Nonqualified deferred compensation plans (NQDCPs) are effective, flexible tools to help recruit, reward and retain top talent. However, these plans present potential risks to participant benefits that do not apply to qualified plans such as 401(k) programs. NQDCP benefits are essentially IOUs from the employer to the participant, unfunded promises to pay benefits in the […]
Nonqualified Excess Deferral Plans for Key Employees
Do your key employees bump against the qualified plan savings limits each year? Does your 401(k) plan issue refunds to your highly compensated employees due to failed discrimination testing? Help your key employees create a clear path toward retirement readiness with an excess deferral nonqualified deferred compensation plan (NQDCP).
Deferred Compensation Plans
Tools to address qualified retirement plan refunds. The Problem 401(k) plans provide valuable retirement benefits for most employees. However, highly-compensated employees (HCEs) can be held back by these plans, since IRS contribution limits are often quite low compared to their incomes. In many cases, HCEs can’t even contribute the full amount normally allowed because a […]
Pass-Through Entities and Deferred Compensation Plans: Key Considerations
Many closely held businesses are structured as pass-through tax entities such as S-corporations or limited liability corporations (LLCs). This allows them to avoid the double taxation inherent in C-corporations, where income is first taxed at the corporate level, then taxed a second time when dividends are paid to owners. However, this structure means that owners […]
Deferred Compensation Plan Features Overview
Using Non-qualified Deferred Compensation Plan “True-Up”Features To Restore 401(k) Plan Matching Contributions Non-qualified deferred compensation plans (NQDCPs) are valuable tools to help highly compensated employees (HCEs) create supplemental retirement income. Participants can defer virtually unlimited amounts of income from taxation, and employers can make optional contributions to these plans as recruiting and retention tools. However, […]
FICA Taxation and Deferred Compensation Plans: Key Considerations
One of the primary benefits of nonqualified deferred compensation plans (NQDCPs) is income tax deferral. Employee deferrals and employer contributions are not subject to current taxation, and benefits grow tax-deferred. Benefits are only subject to income taxation when they are distributed at some point in the future. Unlike the straightforward rules for NQDCP income taxation, […]
Corporate-Owned Life Insurance (COLI) Implementation and Plan Management Overview
Your company has chosen to informally fund its nonqualified deferred compensation plan (NQDCP) with Corporate-Owned Life Insurance (COLI). Like many plan sponsors, you have determined that COLI is a tax-efficient way to finance and recover the costs of your NQDCP. This guide will help you move from your prepurchase due diligence process to implementation and […]
