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Tom Meaglia, ChFC®, AEP®,

CLU®, CRPC®, MSFS

Chartered Financial Consultant

Investment Advisor Representative

Chartered Retirement Planning Counselor

CA Insurance Lic. #0567507

 

Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750

 

Toll Free: 800-386-3700

Bus:         909-593-6105

Cell:         818-681-8600

Fax:         909-593-6120

 

Email: tom@meagliafinancialconsulting.com

Website: www.meagliafinancialconsulting.com

May/June 2020

Attract Top Talent

Attract Top Talent

When you need to recruit the very best executives, offering a nonqualified deferred compensation package can help separate you from your competitors.


Nonqualified Defined
The IRS defines a nonqualified deferred compensation (NQDC) plan as an elective or non-elective plan, agreement, method or arrangement between an employer and an employee that pays compensation in the future. In comparison to qualified plans, NQDC plans do not typically provide the tax benefits associated with qualified plans.


Types of NQDC Plans
Companies may structure NQDC plans in a variety of ways. They might defer a portion of an executive’s salary, pushing it into the future where it can help supplement retirement income, while reducing current taxable income. Executive bonus plans operate on the same premise, deferring bonus income to the future. These plans may defer nonqualified contributions from employers and employees above what qualified plans allow.


Employer Points
Even without the tax advantages of qualified plans, NQDC plans benefit employers because an unfunded arrangement frees up working capital. One efficient way for an employer to prefund the plan is to purchase life insurance on the employee to pay benefits upon retirement. When employers prefund an NQDC plan, the amount also may be tax-deductible. Consult your tax professional.


Employee Points
Executives like NQDC plans because they don’t have a contribution limit. They may negotiate an agreement that annually defers much more money than allowed by qualified plans. And, unlike qualified plans, NQDC plans normally don’t require minimum distributions.


However, a company’s bankruptcy can expose NQDC money to the claims of creditors and there are no guarantees any company won’t go out of business, which can put the employee’s deferred compensation at risk. Those with unfunded NQDC benefits must also rely on their companies’ financial strength. Early distribution, loans and rollovers of plan funds are not allowed and FICA taxes may apply upon distribution. And if employees leave before a contractually agreed-upon term, they can forfeit all or a portion of benefits.


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Thomas Meaglia is an Investment Adviser Representative of Coppell Advisory Solutions LLC, dba, Fusion Capital Management, a registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
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