Clearly, no body asked the marketing people before coming up with this 1. Get further on an affiliated portfolio by visiting company website. Who on earth thought up the title 'non-qualified deferred compensation'? Oh, it is descriptive alright. But who would like anything 'non-qualified'? Would you like a 'non-qualified' doctor, lawyer, or accountant? What's worse is deferring compensation. How many people need to work to-day and receive money in five-years? The thing is, non-qualified deferred compensation is a superb idea; it only features a bad name.
Non-qualified deferred compensation (NQDC) is a effective retirement planning tool, specially for owners of closely-held corporations (for purposes of this article, I'm only going to cope with 'C' corporations). NQDC plans aren't qualified for two things; a number of the income tax benefits given qualified retirement plans and the worker defense provisions of the Employee Retirement Income Security Act (ERISA). What NQDC plans do offer is freedom. Great gobs of freedom. Flexibility is something qualified programs, after decades of Congressional tinkering, absence. Losing of some tax benefits and ERISA provisions might appear an extremely small price to pay when you consider the numerous benefits of NQDC strategies.
A NQDC plan is a written contract between the employee and the corporate employer. This elegant read more link has endless cogent tips for when to see about it. The contract covers employment and payment that will be presented in the future. The NQDC contract gives to the staff the employer's unsecured promise to pay some potential advantage in exchange for services today. The promised future benefit might be in one of three basic types. Some NQDC plans resemble defined benefit plans because they promise to pay the worker a fixed dollar amount or fixed percentage of pay for a time period after retirement. Identify supplementary info on an affiliated URL - Click here: nerium reviews. Another type of NQDC resembles a precise contribution plan. A fixed volume adopts the employee's 'account' each year, often through voluntary pay deferrals, and the worker is eligible for the stability of the account at retirement. The final kind of NQDC strategy provides a death benefit for the employee's designated beneficiary.
The key advantage with NQDC is freedom. With NQDC strategies, the employer can discriminate freely. The employer can pick and choose from among workers, including him/herself, and benefit just a select few. The company may treat those chosen differently. The benefit stated do not need to follow some of the principles 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 would love it to be. I found out about consumers by browsing Google Books. Through the use of life-insurance services and products, the tax deferral characteristic of qualified plans could be simulated. Precisely drafted, NQDC plans do not lead to taxable income to the staff until payments are made.
To obtain this freedom the employee and employer should give something up. The company loses the up-front tax deduction for the contribution to the plan. However, the company will get a reduction when benefits are paid. The security is lost by the employee offered under ERISA. Nevertheless, often the staff involved is this concern is mitigated by the business owner which. Also you'll find practices open to supply the non-owner worker with a way of measuring security. In addition, the marketing guys have gotten your hands on NQDC ideas, so you'll see them named Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..
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