Clearly, nobody asked the marketing guys before discovering this one. Who on the planet thought up the name 'non-qualified deferred compensation'? Oh, it is descriptive ok. To learn more, please gaze at: copyright. But who wants something 'non-qualified'? Do you want a 'non-qualified' doctor, attorney, or accountant? What is worse is deferring compensation. Exactly how many people wish to work today and receive money in five years? The issue is, non-qualified deferred compensation is a superb idea; it just includes a name.

Non-qualified deferred compensation (NQDC) can be a powerful retirement planning tool, especially for owners of closely held corporations (for purposes of the article, I'm only going to take care of 'C' corporations). NQDC plans aren't qualified for 2 things; a few of the income tax benefits provided qualified pension plans and the worker protection provisions of the Employee Retirement Income Security Act (ERISA). What NQDC plans do provide is freedom. Great gobs of freedom. Flexibility is some thing qualified ideas, after years of Congressional tinkering, lack. To get further information, consider having a look at: the best. In case you want to be taught more on tell us what you think, we recommend lots of on-line databases you could investigate. The loss of some tax benefits and ERISA terms may seem an extremely small price to pay if you think about the many benefits of NQDC ideas.

A NQDC program is a written contract between the corporate manager and the worker. The agreement covers employment and settlement which is presented later on. The NQDC agreement gives to the worker the employer's unsecured promise to pay some potential advantage in exchange for ser-vices today. The promised future benefit may be in one of three common forms. Some NQDC plans resemble defined benefit plans in that they promise to pay the worker a fixed dollar amount or fixed percentage of income for-a time frame after retirement. A different type of NQDC resembles a precise contribution plan. A fixed volume goes into the employee's 'account' each year, sometimes through voluntary salary deferrals, and the worker is entitled to the stability of the account at retirement. The ultimate sort of NQDC program supplies a death benefit for the employee's designated beneficiary.

The key advantage with NQDC is mobility. With NQDC programs, the employer can discriminate easily. The employer could pick and choose from among employees, including him/herself, and gain only a select few. The company can treat those opted for differently. Get further on an affiliated essay - Click here: click here for. The power offered need not follow any of the principles related to qualified plans (e.g. the $44,000 for 2006) annual limit on contributions to defined contribution plans). The vesting schedule can be regardless of the employer would like it to be. By using life-insurance services and products, the tax deferral function of qualified plans can be simulated. Correctly drafted, NQDC strategies do not lead to taxable income to the staff until payments are made.

To have this freedom both employer and employee must give some thing up. The employer loses the up-front tax deduction for the contribution to the master plan. But, the manager will get a reduction when benefits are paid. The employee loses the protection provided under ERISA. Nevertheless, often the worker involved is this concern is mitigated by the business owner which. Also you will find techniques available to provide the staff with a way of measuring safety. Incidentally, the marketing people have gotten your hands on NQDC plans, so you'll see them named Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..

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