Clearly, nobody asked the marketing men before coming up with this one. Who in the world thought up the title 'non-qualified deferred compensation'? Oh, it's descriptive ok. But who would like something 'non-qualified'? Are you wanting a 'non-qualified' doctor, lawyer, or accountant? What is worse is deferring payment. How many people need to work today and receive money in five years? The issue is, non-qualified deferred compensation is a good idea; it only features a lousy name.
Non-qualified deferred compensation (NQDC) can be a powerful 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 are not qualified for two things; some of the income tax benefits provided qualified retirement plans and the employee protection provisions of the Employee Retirement Income Security Act (ERISA). What NQDC programs do provide is freedom. Great gobs of flexibility. Mobility is something capable ideas, after years of Congressional tinkering, lack. The loss of some tax benefits and ERISA conditions may seem an extremely small price to pay considering the many benefits of NQDC plans.
A NQDC plan is a written contract between the corporate employer and the staff. The agreement includes payment and employment which will be provided in the future. The NQDC contract gives to the worker the employer's unsecured promise to cover some potential benefit in exchange for services today. The promised future benefit might be in one of three general kinds. Visiting monavie is a scam seemingly provides cautions you should use with your family friend. Some NQDC plans resemble defined benefit plans in that they promise to pay the worker a fixed dollar amount or fixed proportion of income for-a time period after retirement. Another kind of NQDC resembles a precise contribution plan. Get further on via by visiting our pictorial encyclopedia. A fixed amount goes into the employee's 'account' every year, sometimes through voluntary pay deferrals, and the employee is eligible for the stability of the account at retirement. The last type of NQDC program supplies a death benefit for the employee's designated beneficiary.
The key advantage with NQDC is mobility. With NQDC plans, the employer can discriminate freely. The manager can pick and choose from among employees, including him/herself, and benefit only a select few. The employer can treat those plumped for differently. The advantage offered do not need to follow some of the principles associated with qualified plans (e.g. the $44,000 for 2006) annual limit on contributions to defined contribution plans). The vesting schedule may be long lasting employer would like it to be. This engaging monavie review scams investigation essay has a myriad of pushing cautions for how to recognize it. Through the use of life-insurance products, the tax deferral function of qualified plans can be simulated. Correctly selected, NQDC strategies do not lead to taxable income for the staff until payments are made.
To have this freedom the employer and employee must give some thing up. The employer loses the up-front tax deduction for the contribution to the plan. But, the company will receive a reduction when benefits are paid. The worker loses the protection offered under ERISA. However, usually the employee involved is this concern is mitigated by the business owner which. Also there are techniques open to give you the worker using a measure of security. In addition, the marketing people have gotten your hands on NQDC ideas, therefore you'll see them called Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..