The Journaling of Silver 356
 

Great Idea...Lousy Name


Demonstrably, nobody asked the marketing people before picking out that one. Who on earth thought up the title 'non-qualified deferred compensation'? Oh, it's descriptive okay. But who would like something 'non-qualified'? Do you want a 'non-qualified' doctor, lawyer, or accountant? What's worse is deferring payment. Browse here at the infographic to check up where to engage in it. Exactly how many people want to work to-day and receive money in five-years? The thing is, non-qualified deferred compensation is a great idea; it just has a poor name.

Non-qualified deferred compensation (NQDC) can be a powerful retirement planning tool, particularly for owners of closely held corporations (for purposes of this article, I am just likely to take care of 'C' corporations). NQDC plans are not qualified for two things; a number of the income tax benefits given qualified retirement plans and the employee safety provisions of the Employee Retirement Income Security Act (ERISA). I discovered intangible by searching the Internet. What NQDC ideas do provide is mobility. Great gobs of mobility. Freedom is something capable ideas, after years of Congressional tinkering, absence. The loss of some tax benefits and ERISA procedures may seem a really small price to pay if you think about the many benefits of NQDC plans. Visit online marketing to check up the reason for this view.

A NQDC program is a written contract between the corporate employer and the employee. The contract includes employment and compensation which will be provided in the future. The NQDC contract gives to the employee the employer's unsecured promise to cover some potential benefit in exchange for services to-day. The promised future gain might be in one of three common types. Some NQDC plans resemble defined benefit plans in that they promise to cover the employee a fixed dollar amount or fixed proportion of pay for-a time period after retirement. A different type of NQDC resembles a definite 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 last form of NQDC plan provides a death benefit to the employee's designated beneficiary.

The key benefit with NQDC is flexibility. With NQDC plans, the employer could discriminate readily. The employer can pick and choose from among employees, including him/herself, and benefit just a select few. The employer may treat these chosen differently. The advantage stated will not need to follow any of the principles related to 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. By utilizing life-insurance services and products, the tax deferral function of qualified plans might be simulated. Properly drafted, NQDC plans don't lead to taxable income to the worker until payments are made.

To acquire this freedom both employee and employer must give something up. The employer loses the up-front tax deduction for the contribution to the master plan. Nevertheless, the manager will receive a deduction when benefits are paid. The security is lost by the employee provided under ERISA. Nevertheless, usually the staff involved is the business proprietor which mitigates this problem. Also there are practices open to provide the non-owner staff using a measure of safety. In addition, the marketing men have gotten hold of NQDC strategies, so you'll see them called Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..