Planning strategies
Executive Benefits
Privately held companies compete for talent against firms that can offer equity. Nonqualified benefits are how a closely held business answers that — rewarding the people it most needs to keep, on terms the qualified-plan rules will not allow.
Who this is for
Companies retaining key people — and the executives themselves
Closely held companies that want to recruit, retain, and reward executives beyond 401(k) and pension limits. And individual executives evaluating an arrangement their employer has offered — what it is worth, what the risks are, and how it fits the rest of their planning.
Arrangements we design
The common structures
Nonqualified deferred compensation (NQDC)
An unfunded promise to pay compensation in the future. Flexible on participation and benefit formula; subject to Section 409A and to the company’s creditors. Often informally funded with corporate-owned life insurance.
Supplemental executive retirement plan (SERP)
A defined benefit at retirement for a targeted executive, funded entirely by the employer — a targeted alternative to a broad pension.
Section 162 executive bonus
The company bonuses the premium on a policy the executive owns. Simple, currently deductible to the employer, and fully portable to the executive.
Split-dollar
Employer and executive share the cost and benefit of a life insurance policy under either the economic-benefit or loan regime. Useful where the executive wants permanent personal coverage and the employer wants cost recovery.
What we do
Modeled for both sides
We model the arrangement from the company’s perspective — cost, cost recovery, balance-sheet and earnings treatment — and from the executive’s: after-tax benefit, vesting and forfeiture risk, and interaction with their other retirement assets.
Our role is design and funding. We work with the company’s counsel on the plan document and Section 409A compliance, design and place the informal funding where the company wants it, and hand off ongoing plan administration to the company’s counsel and its third-party administrator.
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