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One way to reward key employees is to offer them executive benefit plans.
These plans are also called non-qualified plans, since they do not qualify for the tax benefits of 401(k) or defined benefit plans.
Executive benefit plans, which may include bonus, split dollar and deferred compensation plans, have more flexible funding options, vesting requirements, distribution guidelines and reporting requirements than qualified plans. By contrast, tax-qualified plans offer a number of tax benefits but can be expensive to administer and have complex regulatory requirements. They also must generally cover all eligible employees of a business who wish to participate. If a small business owner wants to provide a retirement benefit for just himself and maybe two or three key people, a non-qualified plan can be the answer.
Executive benefits are designed primarily for highly compensated employees and key people. They allow the employer to choose which select group of key employees participate in and receive benefits from the plan. This can create the opportunity to reward key employees, provide powerful incentives for those employees to remain with the company and fill gaps where other benefits may fall short. Executive benefits can also be structured to provide a beneficial arrangement to the business owner. Executive benefits can help meet the needs of a small business at a competitive cost with fewer administrative requirements.
Depending on the plan and its structure, funding may be the responsibility of the employer, the employee, or shared. Tax benefits may be available for some types of plans. For more information, contact your financial professional.
AXA Advisors, LLC does not provide legal or tax advice. Please consult your tax or legal advisor regarding your individual situation.
Robin Davey offers securities through AXA Advisors, LLC
(member NASD, SIPC) 5 Maxwell Dr. Clifton Park, NY 12065, and offers
annuity and insurance products through an insurance brokerage affiliate, AXA
Network, LLC and its subsidiaries.
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