Non-Qualified Employee Benefits

Non-qualified employee benefits are typically for owners and key employees. Many businesses already offer a qualified retirement plan such as a profit sharing plan, 401(k), SEP, or Simple IRAs.  Unfortunately, all of these plans have rules governing contribution limits, minimum distributions, early withdrawals and minimum vesting amounts. 

Non-qualified plans are tax-deferred, employer sponsored retirement plans that are not subject to the Employee Retirement Income Security Act (ERISA) guidelines.  These plans are also exempt from discriminatory and other testing.

 The contributions made to these plans are usually taxable for both the employer and employee.  However, non-qualified plans allow the participants to defer taxes until retirement, when they are presumable in a lower tax bracket.

These plans are often used to compensate key executives in lieu of making them partners or part owners in the organization.  Listed below are the four major types of non-qualified plans:

  • Deferred compensation plans, which deal with earned income payable at a later date in order to defer taxes
  • Executive bonus plans
  • Group carve-out plans
  • Split-dollar life insurance plans

Our advisors can help develop strategies that supplement the compensation for key employees while excluding the rank and file employees.10

10 Insurance services are provided by Woodforest Financial Services, Inc., which is not affiliated with RJFS.

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