Non-Qualified Deferred Compensation (NQDC) can be a powerful retirement planning tool, particularly for owners of closely held corporations (for purposes of this article, we will only deal with IRS Subchapter “C” corporations). Non-Qualified Deferred Compensation plans are not qualified for two things; some of the income tax benefits afforded qualified retirement plans and the employee protection provisions of the Employee Retirement Income Security Act (ERISA). What Non-Qualified Deferred Compensation plans do offer is flexibility, which is something qualified plans lack.
With Non-Qualified Deferred Compensation plans, the employer can discriminate freely. The employer can pick and choose among employees, including him or herself, and benefit only a select few. The employer can treat those chosen differently. The benefit promised need not follow any of the rules associated with qualified plans. The vesting schedule can be whatever the employer would like it to be. Properly drafted, Non-Qualified Deferred Compensation plans do not result in taxable income to the employee until payments are made.
Non-qualified plans are an excellent tool to help reward, retain and recruit key employees to your organization. Asset Strategy Retirement Plan Consultants will work with you to discuss goals for your plan and identify “gaps” that exist with key employees' retirement income.
Non-qualified plans can be unfunded (promise by organization to pay benefit) or funded. ASRC will work with your organization so that you understand the pros and cons to each and if your plan is funded, what is the best way to fund.