Clearly, no body asked the marketing guys before discovering this 1. Who on earth thought up the title 'non-qualified deferred compensation'? Oh, it's descriptive okay. But who wants anything 'non-qualified'? Do you want a 'non-qualified' doctor, attorney, or accountant? What's worse is deferring payment. Clicking check out scentsy compensation plan probably provides suggestions you might tell your pastor. Exactly how many people want to work today and get paid in five-years? The issue is, non-qualified deferred compensation is a good idea; it just includes a poor name.
Non-qualified deferred compensation (NQDC) is a powerful retirement planning tool, particularly for owners of closely held corporations (for purposes of the article, I'm just going to cope with 'C' corporations). NQDC plans aren't 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 offer is mobility. Great gobs of freedom. Mobility is something capable ideas, after decades of Congressional tinkering, absence. Losing of some tax benefits and ERISA procedures might seem an extremely small price to pay considering the numerous benefits of NQDC programs.
A NQDC strategy is a written contract between the corporate employer and the staff. The agreement includes payment and employment which will be presented in the future. The NQDC contract gives to the worker the employer's unsecured promise to pay some future benefit in exchange for ser-vices to-day. To compare additional info, consider checking out: scentsy scam. The promised future advantage could be in one of three common forms. 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 period of time after retirement. My boss discovered tour scentsy by browsing books in the library. Another kind of NQDC resembles a precise contribution plan. A fixed volume goes into the employee's 'account' annually, sometimes through voluntary wage deferrals, and the worker is eligible for the stability of the account at retirement. The last sort of NQDC plan provides a death benefit to the employee's designated beneficiary.
The key advantage with NQDC is freedom. With NQDC strategies, the employer may discriminate freely. The company could pick and choose from among employees, including him/herself, and gain just a select few. The company can treat these opted for differently. The advantage stated will not need to follow any of the rules related to qualified plans (e.g. the $44,000 for 2006) annual limit on contributions to defined contribution plans). This compelling scentsy compensation plan paper has a pile of cogent tips for where to think over it. The vesting schedule may be regardless of the manager would like it to be. By utilizing life-insurance products, the tax deferral characteristic of qualified plans can be simulated. Precisely written, NQDC programs do not lead to taxable income to the staff until payments are made.
To acquire this freedom both employer and employee should give something up. The employer loses the up-front tax deduction for the contribution to the master plan. Nevertheless, the employer will receive a discount when benefits are paid. The security is lost by the employee offered under ERISA. But, usually the staff involved is this concern is mitigated by the business owner which. Also you'll find practices open to provide the non-owner employee using a way of measuring protection. By the way, the marketing men have gotten hold of NQDC strategies, therefore you'll see them named Supplemental Executive Retirement Plans or Excess Benefit Plans among other names..
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