Non Qualified Plans
Nonqualified Deferred Compensation (NQDC) Plans─Taking Retirement to the Next Level
NQDCs came about due to the cap on contributions to government-sponsored retirement savings plans. High-income earners cannot contribute the same proportional amounts to their tax-deferred retirement savings as average or low-income earners.
NQDCs enable high-income earners to defer ownership of income and avoid income taxes on their earnings while enjoying tax-deferred investment growth.
Importantly, executive nonqualified plans are considered unfunded contractual obligations to pay future benefits to a plan participant, based on what he or she elects. As a sponsoring company, you can choose to informally finance the future obligation with many options are available to you. Companies can invest in a wide range of instruments to build the asset, commonly with mutual funds or variable universal life insurance contracts owned by the company.
In short, even though an executive may do all the right things, he or she can unwittingly arrive at retirement with a shortfall in income and miss their retirement goals by double-digit percentages. NQDC plans add the accumulation power needed.
SKA Employer Solutions advises on plan design, implementation and administration of NQDC plans, and we pledge to streamline the process.
Employer Solutions Services