Demonstrably, nobody asked the marketing guys before coming up with this 1. Who on the planet thought up the name 'non-qualified deferred compensation'? Oh, it's detailed alright. But who would like anything 'non-qualified'? Are you wanting a 'non-qualified' doctor, lawyer, or accountant? What is worse is deferring compensation. Just how many people need to work to-day and get paid in five years? The thing is, non-qualified deferred compensation is a great idea; it just has a name. In the event people choose to dig up more on per your request, there are tons of online resources people might pursue.
Non-qualified deferred compensation (NQDC) is a powerful retirement planning tool, particularly for owners of closely-held corporations (for purposes of this article, I'm only going to deal with 'C' corporations). NQDC plans are not qualified for 2 things; a few of the income tax benefits afforded qualified pension plans and the worker protection provisions of the Employee Retirement Income Security Act (ERISA). What NQDC plans do offer is freedom. If you have an opinion about police, you will likely hate to research about link. Great gobs of flexibility. Freedom is something capable plans, after decades of Congressional tinkering, absence. The loss of some tax benefits and ERISA terms might appear an extremely small price to pay considering the many benefits of NQDC programs.
A NQDC strategy is a written agreement between the corporate workplace and the worker. The agreement covers employment and compensation which will be provided later on. The NQDC agreement gives to the employee the employer's unsecured promise to pay some future advantage in exchange for ser-vices today. The promised future benefit might be in one of three basic types. Some NQDC plans resemble defined benefit plans in that they promise to pay the employee a fixed dollar amount or fixed percentage of income for-a period of time after retirement. Another kind of NQDC resembles a precise contribution plan. A fixed amount adopts the employee's 'account' each year, often through voluntary pay deferrals, and the employee is entitled to the stability of the account at retirement. Clicking take shape for life review certainly provides suggestions you should use with your girlfriend. The last form of NQDC plan provides a death benefit for the employee's designated beneficiary.
The key benefit with NQDC is freedom. With NQDC options, the employer may discriminate easily. To get a second standpoint, people might wish to check out: take shape for life reviews. The employer could pick and choose from among employees, including him/herself, and benefit just a select few. The employer may treat these opted for differently. The benefit assured will not need to follow the rules related to qualified plans (e.g. the $44,000 for 2006) annual limit o-n contributions to defined contribution plans). The vesting schedule can be regardless of the employer would like it to be. By utilizing life insurance products, the tax deferral feature of qualified plans may be simulated. Properly written, NQDC programs do not lead to taxable income to the employee until payments are made.
To have this flexibility the employee and employer should give something up. The company loses the up-front tax deduction for the contribution to the program. Nevertheless, the company will get a deduction when benefits are paid. The worker loses the security offered under ERISA. But, frequently the employee involved is the company owner which mitigates this concern. Also you can find methods open to supply the non-owner employee using a measure of protection. By the way, the marketing folks have gotten your hands on NQDC plans, therefore you'll see them called Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..