By Edward “Ed” V. O’Neal, Vice President and Manager, Retirement PlansPrint This Post
Recruiting and retaining key employees and executive management can be critical to the ongoing success for any employer. Given this, what solutions are available to employers to entice the ‘right’ employees to join their organization, or to encourage key employees to stick around?
Offering competitive compensation and a comprehensive benefits program is an important element in attracting the ‘right’ talent to an organization. However, qualified retirement plans, such as 401(k) plans, have strict limits on the level of contributions permitted for employees. This can present challenges for employers attempting to entice and/or reward their key and highly compensated employees. Offering a Nonqualified Deferred Compensation (NQDC) plan could be a solution for this dilemma.
A NQDC plan is a written agreement authorizing an employer to pay benefits (or deferred compensation) to select employees at some agreed future date. NQDC plans are often used as a supplement to an existing retirement program and do not have the contribution limits and restrictions associated with most qualified retirement plans (i.e. 401(k) plans). This can be appealing for employers needing to attract or retain highly compensated key employees that may bump against the contribution limits of traditional qualified retirement plans.
Additionally, NQDC plans can have quite a bit of flexibility in their design, permitting both employee and employer contributions, as well as multiple funding arrangements. Overall, these plans can be an effective, flexible and powerful tool in providing incentives for attracting key employees or retaining key leaders and executives. Your Benjamin F. Edwards financial advisor can provide you with a broader overview of NQDC plans, and be sure to consult with your legal and/or tax advisor before implementing a NQDC plan.