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Non-Qualified Deferred Compensation Plans

There are several different types of non-qualified deferred compensation (NQDC) plans that employers can establish. Here are some common types:

Salary Continuation Plan

Under this arrangement, an employer agrees to continue paying a portion of an employee's salary or bonus after retirement or separation from service. The payments are typically structured as periodic installments over a specified period.

Supplemental Executive Retirement Plan (SERP)

SERPs are designed specifically for highly compensated executives. They provide additional retirement benefits beyond what is offered through qualified plans. SERPs can be customized to suit the executive's needs, often offering generous benefit formulas and payout options.

Top-Hat Plan

These plans are limited to a select group of highly compensated employees or key executives. Top-Hat plans are exempt from certain ERISA (Employee Retirement Income Security Act) requirements that apply to qualified retirement plans. They offer flexibility in plan design and can provide deferred compensation benefits tailored to the needs of the covered employees.

Deferred Savings Plan

This type of NQDC plan allows employees to defer a portion of their salary or bonuses into an account, where it can grow tax-deferred until withdrawal. The employee has control over the investment options and timing of distributions, typically at retirement or as specified by the plan terms.

Phantom Stock Plan

Phantom stock plans tie an employee's compensation to the company's stock performance without granting ownership. The employee receives notional units or credits that increase or decrease in value based on the company's stock price. The accumulated value is paid out in cash or stock at a predetermined date or event.

Stock Appreciation Rights (SARs)

Like phantom stock plans, SARs provide employees with the opportunity to benefit from the appreciation in the company's stock. Upon exercise, employees receive the difference between the stock's fair market value at the exercise date and the grant price in cash or stock.

It's important to note that the availability and specific features of NQDC plans can vary based on the employer's preferences, legal requirements, and the employee's compensation level. We will use our unique process to Design, Implement, Monitor and Evolve, also known as the “DIME Method” to build a plan that is right for you.

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