In recent years Small Business or Corporate Qualified Retirement plans have lost favor as a result of higher administration costs, narrowing income tax brackets and strict ERISA rules including discrimination, vesting, funding and prohibitive investments.
The primary concern of our clients, who are small business owners, is the attraction and retention of “Key Employees”. Nonqualified means that the specific plan or contract does not come under the review, reporting or approval of the IRS or ERISA. It allows us to work with our business clients to design and implement a plan specific to the needs of the employer and key employee(s).
Simply stated, the business agrees to pay a compensation for a set period that the employee will receive in the future. The benefits are paid to the employee and deductible to the business and the benefits are taxed to the key employee when received.
A cash value life insurance contract can be used to informally fund an agreement. It can provide the necessary funds at either distribution or death.