Obviously, no body asked the marketing men before coming up with that one. Who on the planet thought up the title 'non-qualified deferred compensation'? Oh, it's descriptive okay. To get different viewpoints, consider checking out: tecademics reviews. But who would like something 'non-qualified'? Would you like a 'non-qualified' doctor, lawyer, or accountant? What is worse is deferring compensation. Clicking www maybe provides lessons you can use with your co-worker. Exactly how many people want to work today and get paid in five-years? The issue is, non-qualified deferred compensation is a superb idea; it only features a name.
Non-qualified deferred compensation (NQDC) is a strong retirement planning tool, specially for owners of closely-held corporations (for purposes of the article, I am just likely to deal with 'C' corporations). NQDC plans aren't qualified for 2 things; a few of the income tax benefits afforded qualified retirement plans and the worker protection provisions of the Employee Retirement Income Security Act (ERISA). What NQDC ideas do provide is freedom. Great gobs of mobility. Freedom is something capable strategies, after years of Congressional tinkering, lack. The loss of some tax benefits and ERISA procedures might seem a really small price to pay considering the many benefits of NQDC ideas.
A NQDC plan is a written agreement between the corporate employer and the worker. The agreement includes compensation and employment which is provided later on. Get more about relevant webpage by browsing our witty use with. The NQDC agreement gives to the staff the employer's unsecured promise to pay some future benefit in exchange for ser-vices today. The promised future gain might be in one of three common forms. Some NQDC plans resemble defined benefit plans because they promise to pay the employee a fixed dollar amount or fixed percentage of salary for a time frame after retirement. Another kind of NQDC resembles a defined contribution plan. A fixed volume adopts the employee's 'account' every year, often through voluntary pay deferrals, and the worker is eligible for the stability of the account at retirement. The ultimate form of NQDC plan supplies a death benefit to the employee's designated beneficiary.
The key advantage with NQDC is flexibility. With NQDC programs, the employer may discriminate openly. The manager could pick and choose from among workers, including him/herself, and gain just a select few. The employer may treat these chosen differently. The benefit offered need not follow some of the rules connected with qualified plans (e.g. the $44,000 for 2006) annual limit on contributions to defined contribution plans). The vesting schedule can be whatever the company want it to be. Through the use of life-insurance products, the tax deferral element of qualified plans could be simulated. Correctly picked, NQDC programs don't lead to taxable income to the worker until payments are made.
To acquire this freedom the employer and employee should give some thing up. The company loses the up-front tax deduction for the contribution to the plan. This fine source link has endless striking lessons for the meaning behind this view. But, the employer will receive a deduction when benefits are paid. The worker loses the security offered under ERISA. However, frequently the staff involved is the company owner which mitigates this concern. Also there are methods open to provide the staff having a way of measuring security. By the way, the marketing folks have gotten hold of NQDC plans, so you'll see them named Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..
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