Looking to Retain Key Talent or Attract New Hires in Today’s Competitive Job Market? We Have a Solution for You
In the dynamic landscape of today’s workforce, the pursuit of effective strategies to retain valuable employees and attract new talent is more critical than ever. Enter the realm of Non-Qualified Deferred Compensation (NQDC) plan. Offering unparalleled flexibility, these plans empower employees and independent contractors to defer a portion of their compensation, providing financial security for their future. Join us as we delve into the intricacies of NQDC plans, exploring how they stand out in the competitive employment market and why they might just be the solution you’re seeking.
Understanding NQDC Plans
A NQDC plan provides a unique benefit allowing employees and select independent contractors to defer a portion of their compensation. This could include salary, bonuses, or other forms of income, with the option to receive it at a later date—commonly during retirement but also in cases of disability, separation from employment, or a predetermined future date.
How NQDC Plans Differ from 401(k)s
In contrast to 401(k)s, NQDC plans lack an annual contribution limit. However, the company and the plan determine deferral limitations for participants, offering a more flexible approach to financial planning.
Tailoring for Company Goals
Customization is key. Participants can shape the plan to align with their financial goals. Encouraging discussions with personal advisors ensures a clear understanding of associated benefits and risks.
Rabbi Trust: Ensuring Security
NQDC plans often go hand-in-hand with a “Rabbi” Trust, named after an IRS ruling permitting the use of such trusts. This ensures the security of deferred compensation benefits while keeping assets outside of the employer’s control until distribution. Compliance with specific regulatory requirements is crucial for favorable tax treatment.
Benefits and Control
As the employer contributes to the trust, high-level executives benefit from supplemental retirement benefits, showcasing the company’s commitment to their financial security. While a “Rabbi” Trust provides security, it doesn’t shield assets in the event of an employer’s bankruptcy.
Investment and Third-Party Administration
Investment scenarios may vary. Some allow employers to retain control for investment purposes, determining guidelines for trustees. Others involve Third-Party Administrators managing investments, ensuring adherence to plan and trust agreements. Typically, trust accounts are invested in insurance, mitigating investment risk.
How Cornerstone Can Help
Cornerstone offers support in drafting documents, assembling a team of advisors, and serving as a trustee. If integrating a Rabbi Trust aligns with your company vision, we’re eager to discuss how it can benefit your team, please reach out by completing the Contact Us form or contacting Leonetta directly.
