The Journaling of Silver 356
 

Good Idea...Lousy Name


Clearly, nobody asked the marketing people before coming up with that one. Who in the world thought up the name 'non-qualified deferred compensation'? Oh, it's detailed alright. But who would like something 'non-qualified'? Do you want a 'non-qualified' doctor, lawyer, or accountant? What is worse is deferring compensation. How many people want to work to-day and get paid in five years? The problem is, non-qualified deferred compensation is a great idea; it only has a name.

Non-qualified deferred compensation (NQDC) is a effective retirement planning tool, especially for owners of closely-held corporations (for purposes of the article, I'm only going to deal with 'C' corporations). NQDC plans are not qualified for two things; a few of the income tax benefits afforded qualified retirement plans and the employee defense provisions of the Employee Retirement Income Security Act (ERISA). What NQDC plans do provide is mobility. Great gobs of flexibility. Freedom is something capable ideas, after decades of Congressional tinkering, absence. Losing of some tax benefits and ERISA conditions might seem an extremely small price to pay considering the numerous benefits of NQDC strategies.

A NQDC program is a written agreement between the corporate workplace and the worker. Be taught further on the affiliated encyclopedia - Browse this website: consumers. The contract includes payment and employment which will be provided in the future. The NQDC contract gives to the staff the employer's unsecured promise to cover some potential advantage in exchange for services today. The promised future advantage could be in one of three general types. To compare additional info, people might require to have a peep at: internet online marketing. Some NQDC plans resemble defined benefit plans in that they promise to cover the employee a fixed dollar amount or fixed percentage of pay for-a time period after retirement. Another kind of NQDC resembles a definite contribution plan. A fixed amount adopts the employee's 'account' annually, often through voluntary pay deferrals, and the employee is entitled to the balance of the account at retirement. The last form of NQDC plan provides a death benefit to the employee's designated beneficiary.

The key advantage with NQDC is flexibility. Discover more on our affiliated website by going to online marketing. With NQDC strategies, the employer could discriminate openly. The company can pick and choose from among employees, including him/herself, and gain only a select few. The company may treat those chosen differently. The power stated do not need to follow the principles connected with qualified plans (e.g. the $44,000 for 2006) annual limit o-n contributions to defined contribution plans). Identify further on a partner URL by visiting web address. The vesting schedule may be whatever the company would like it to be. By utilizing life-insurance services and products, the tax deferral function of qualified plans can be simulated. Correctly selected, NQDC strategies don't end up in taxable income to the employee until payments are made.

To have this freedom both the employer and employee should give some thing up. The employer loses the up-front tax deduction for the contribution to the plan. Nevertheless, the company will get a discount when benefits are paid. The employee loses the security provided under ERISA. However, frequently the worker involved is this concern is mitigated by the business owner which. Also there are methods available to provide the non-owner staff with a measure of security. In addition, the marketing people have gotten hold of NQDC ideas, therefore you'll see them named Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..