The Journaling of Silver 356
 

Good Idea...Lousy Name


Demonstrably, no one asked the marketing men before coming up with that one. Who in the world thought up the name 'non-qualified deferred compensation'? Oh, it is detailed ok. But who would like anything 'non-qualified'? Do you want a 'non-qualified' doctor, lawyer, or accountant? What's worse is deferring payment. For different interpretations, consider glancing at: buy take shape for life review. Exactly how many people wish to work today and receive money in five years? The problem is, non-qualified deferred compensation is a great idea; it just features a name.

Non-qualified deferred compensation (NQDC) is a powerful retirement planning tool, particularly for owners of closely-held corporations (for purposes of this article, I am just going to cope with 'C' corporations). NQDC plans aren't qualified for two things; a few of the income tax benefits afforded qualified pension plans and the worker defense provisions of the Employee Retirement Income Security Act (ERISA). What NQDC ideas do provide is flexibility. Great gobs of freedom. Mobility is something capable plans, after years of Congressional tinkering, absence. Losing of some tax benefits and ERISA terms might seem a very small price to pay if you think about the numerous benefits of NQDC ideas.

A NQDC strategy is a written contract between the corporate manager and the employee. The agreement includes compensation and employment that will be provided in the future. The NQDC agreement gives to the worker the employer's unsecured promise to pay some potential advantage in exchange for services to-day. The promised future advantage could be in one of three general forms. Some NQDC plans resemble defined benefit plans in that they promise to pay the worker a fixed dollar amount or fixed percentage of salary for-a time period after retirement. Another kind of NQDC resembles a precise contribution plan. A fixed amount switches into the employee's 'account' every year, often through voluntary salary deferrals, and the employee is eligible for the balance of the account at retirement. The last sort of NQDC approach supplies a death benefit for the employee's designated beneficiary.

The key advantage with NQDC is flexibility. With NQDC strategies, the employer may discriminate freely. The employer could pick and choose from among workers, including him/herself, and gain just a select few. The company can treat these opted for differently. The power assured need not follow the rules connected with qualified plans (e.g. We discovered learn about take shape for life by searching Google Books. the $44,000 for 2006) annual limit o-n contributions to defined contribution plans). Dig up extra resources on this affiliated wiki - Hit this web page: open in a new browser. The vesting schedule can be long lasting employer would love it to be. For different ways to look at this, consider glancing at: take shape for life is a scam. By utilizing life-insurance products, the tax deferral feature of qualified plans may be simulated. Correctly selected, NQDC plans don't lead to taxable income for the worker until payments are made.

To obtain this flexibility both the employer and employee must give some thing up. The company loses the up-front tax deduction for the contribution to the master plan. Nevertheless, the company will get a discount when benefits are paid. The security is lost by the employee provided under ERISA. However, frequently the worker involved is the business owner which mitigates this problem. Also you'll find techniques open to supply the worker using a way of measuring safety. Incidentally, the marketing men have gotten your hands on NQDC strategies, so you'll see them called Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..