Great Idea...Lousy Name

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Clearly, no body asked the marketing folks before discovering this 1. Who on earth thought up the name 'non-qualified deferred compensation'? Oh, it's detailed okay. But who would like anything 'non-qualified'? Are you wanting a 'non-qualified' doctor, lawyer, or accountant? What is worse is deferring payment. 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 strong retirement planning tool, especially for owners of closely held corporations (for purposes of the article, I am only likely to deal with 'C' corporations). NQDC plans are not qualified for two things; a few of the income tax benefits afforded qualified pension plans and the employee protection provisions of the Employee Retirement Income Security Act (ERISA). What NQDC programs do offer is mobility. Great gobs of freedom. Freedom is some thing capable programs, after years of Congressional tinkering, lack. The loss of some tax benefits and ERISA conditions may seem a very small price to pay when you consider the numerous benefits of NQDC strategies.

A NQDC plan is a written agreement between the corporate workplace and the worker. Be taught additional info on the affiliated encyclopedia by navigating to the internet. The contract covers settlement and employment that will be offered in the future. The NQDC contract gives to the staff the employer's unsecured promise to cover some future advantage in exchange for services today. My cousin discovered tecademics review by browsing the Chicago Post. If you choose to be taught further on partner site, there are many online resources you might investigate. The promised future advantage could be in one of three basic kinds. Some NQDC plans resemble defined benefit plans because they promise to pay the worker a fixed dollar amount or fixed proportion of salary for-a period of time after retirement. A different type of NQDC resembles an outlined contribution plan. A fixed volume switches into the employee's 'account' each year, often through voluntary pay deferrals, and the worker is eligible for the balance of the account at retirement. The final form of NQDC plan provides a death benefit for the employee's designated beneficiary.

The key advantage with NQDC is mobility. With NQDC plans, the employer may discriminate readily. The manager can pick and choose from among workers, including him/herself, and gain just a select few. The company can treat those opted for differently. The benefit offered need not follow some of the principles associated with qualified plans (e.g. the $44,000 for 2006) annual limit on contributions to defined contribution plans). The vesting schedule may be regardless of the employer would like it to be. Through the use of life insurance products, the tax deferral function of qualified plans might be simulated. Correctly drafted, NQDC programs do not result in taxable income to the worker until payments are made.

To acquire this flexibility both the employer and employee must give something up. The company loses the up-front tax deduction for the contribution to the plan. But, the manager will get a reduction when benefits are paid. The worker loses the protection offered under ERISA. But, often the employee involved is this concern is mitigated by the business owner which. Also there are techniques open to provide the non-owner worker using a measure of protection. Incidentally, the marketing men have gotten hold of NQDC plans, so you'll see them named Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..