Non-Qualified DEFERRED COMPENSATION PLANS
Non-qualified deferred compensation (NQDC) plans allow executives to voluntarily defer, pre-tax, otherwise currently taxable compensation – including salary, bonus, incentives and commissions. These deferred dollars grow tax-free until a future specified date—retirement, termination, death or disability— whereupon payouts would be subject to the executive’s tax rate at that time.
NQDC plans are relatively inexpensive to provide and allow executives to take charge of their coverage options, making them attractive from both the executive and corporate vantage point.
Why Choose a Non-Qualified DEFERRED COMPENSATION PLAN?
NQDC plans identify and fill gaps in retirement shortfalls. These plans provide coverage over and above group insurance and disability coverage.
BENEFITS FOR COMPANIES
- Improve earnings
- Help to make benefits best in class
- Reduce corporate taxes
- Create asset-liability matches
BENEFITS FOR EXECUTIVES
- Income tax relief via unlimited pre-tax deferral of salary, bonuses, commissions, etc.
- Tax-deferred earnings on account balances
- A quality menu of diverse investment alternatives
- Enhanced planning flexibility for life-event purposes (college education, etc.), as well as retirement
- Scheduled distributions without an early withdrawal penalty [10% in a 401(k)]
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERPs)
As an executive’s income increases, the retirement gap—or the money he or she has versus the money needed at retirement age—widens. A Supplemental Executive Retirement Plan, or SERP, can be part of a benefits solution to bridge that gap by providing non-taxable deferred benefits to the executive, and a tax deduction for the sponsoring company.
The Todd Organization constructs competitive executive benefit strategies that bridge the gap between your broad-based group benefits and the needs of your high performers.
Why Choose a Supplemental Executive Retirement Plan (SERP)?
A SERP is a deferred compensation agreement between a company and an executive whereby the company provides supplemental retirement income to the executive if pre-agreed eligibility and vesting conditions are met by the executive. The plan is funded by the company using cash flows, investment funds or cash value life insurance.
BENEFITS FOR COMPANIES
- Company can select who may participate in the plan, determine timing and amount of benefits
- Plans can be structured to pay only when certain corporate goals are met
- Company can establish a vesting schedule to encourage key employee retention
- Plans can be managed using different financial instruments (cash, life insurance, etc.)
- Plans can be set up to require minimal government reporting
- As the owner of the policy, the sponsoring company has access to its cash value and controls the plan
- Company gets a tax deduction when it pays supplemental income benefits to the key employee
- Company can structure the life insurance policy in such a way that it can recover its cost
BENEFITS FOR EXECUTIVES
- Provides additional income that remains untaxed until retirement
- Benefit distributions can be tailored to meet the executive’s individual needs
- While plans are typically paid at retirement, they can also be used as disability payments or as survivor benefits for an executive’s beneficiaries in the event of an untimely death
PLAN DESIGN CONSULTING
At Todd, we sit on the same side of the table as you
The Todd Organization approaches the benefits solution from your vantage point, considering your company’s culture, industry and market, and then identifying progressive funding opportunities and plan options that match your needs and goals.
Our strategic approach and disciplined process pays dividends for our clients. We custom-design plans that are easily understood and are administered with cost efficiencies—and with an asset hedge strategy that has minimal impact on your company's financial statements.
Comprehensive Plan Design.
Approachable, Personal Service.
The professionals at Todd work to simplify the complexities of financial security. We’re here to help:
- Identify gaps in your existing benefits coverage – supplemental retirement plans, performance-based compensation strategies, supplemental executive life and supplemental executive disability insurance plans
- Understand all available options based on your industry, culture, compensation needs and financial situation
- Optimize future benefit plans and administrative providers
- Communicate the benefit plans to your highly compensated population