Deferred Compensation Plans are non-qualified plans (NQDC).
Deferred Compensation Plans are company/organization plans which promise future benefits to some selected employees.
Generally, the promise is unsecured.
There are no ERISA (Employment Retirement of 1974) requirements since the deferred compensation plan is non-qualified.
The employer can discriminate and has freedom to select the employee(s) who are to be future beneficiaries of deferred compensation plan.
The employer has many choices for funding this unsecured promise.
The future benefit period starts at a preset time determined by the deferred compensation plan design.
Generally, assets used to fund these type plans remain assets of the company/organization until dispersed to the plan beneficiary.
In order to “protect beneficiaries future interests” given certain conditions, deferred compensation plans can be designed to implement “payouts” prior to preset future starting points.
Sometimes “Rabbi Trusts” are used within these plans.
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Non-qualified deferred compensation plans can have employee and employer contributions, individually, or both in combination.
Some deferred compensation plans can provide access to assets prior to preset benefit pay date.
NQDC Plans do not have major reporting and no significant filing requirements.
For various practical and tax reasons life insurance is frequently used with these NQDC Plans.
Deferred compensation plan policies are state specific, and not all insurance companies offer deferred compensation plan policies to companies and/or organizations in all states.
The death benefit payable to a beneficiary upon the death of the insured is dependent on the claims paying ability of the issuing life insurance company.
