Non Qualified Deferred CompensationsDuring this current era of smaller salary increases and more conservative bonuses and stock grants, companies have found that adding a nonqualified deferred compensation plan to their Executive Compensation strategy may be just the vehicle they need to attract and retain the most talented executives. This is applicable regardless of whether your company is Private, Publicly traded, or a Non Profit organization. Providing a competitive and well-rounded Executive Compensation strategy is critical in building productivity, profitability, and organizational culture.

While these plans have certain caveats and are not right for every organization, they offer attractive advantages such as:

  • Companies (not the government) determine plan eligibility.
  • Eligible participants can defer whatever percentage of income (salary, bonus, long-term compensation) the company allows.
  • Executives defer current taxes while compounding tax- deferred earnings. Investment choices can mirror those provided in a 401(k) Plan.
  • Participants can set up special “in-service” accounts that allow them to take monetary distributions prior to retirement, without penalty.
  • Plans can be performance-based, and designed to parallel a company’s time horizon (i.e. planned change of control).
  • Plans allow the Company to build an asset, thereby strengthening its balance sheet.
  • Plans are inexpensive to administer and can be structured to provide cost recovery.

LTC Performance Strategies provides executive compensation consulting to our clients through a simple and comprehensive, yet objective Request for Proposal (RFP) process, customized to the specific requirements of their Executive Compensation strategy. Once our clients make their final selection of the provider team, our team works closely with them to ensure that the plan remains compliant and competitive, and is easy to understand and administer.

 

Challenge: Organization contacted LTC because their capital accumulation plan “bombed.” Nobody understood it.  Therefore it was not an effective motivational or retention tool.

Solution: LTC and its executive benefits partner conducted an extensive RFP, and then designed a new plan that was customized to the needs of the company & plan participants.

Results: The plan has been extremely well received. It has grown from 4 to over 35 participants and continues to serve as an exceptional tool for attracting & retaining executive talent.