NEW! Excess 401(k) Plans: Another Type Of Nonqualified Deferred Compensation
To help employees accrue retirement benefits beyond the limits of regular 401(k) plans, most large and medium-sized public companies maintain an excess 401(k) plan. These can be made available to almost all employees, as opposed to top-hat elective deferral plans. This article explains the workings of excess 401(k) plans and the related issues, including taxation.
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Key Points in This Article
To help employees accrue retirement benefits beyond the limits of regular 401(k) plans, most large and medium-sized public companies maintain an excess 401(k) plan.
Excess 401(k) plans can be made available to almost all employees, and are also valuable for companies that do not have a 401(k) safe-harbor plan and have—or could have—discrimination test problems.
Survey results show the use of excess 401(k) plans at companies. As with other types of deferred comp, there are issues of taxation, 409A compliance, and securities law to be aware of.
Richard Friedman is the Vice President of the Benefits & Compensation Group at The Ayco Company, a leading provider of financial-planning services for executives at public companies. In addition, he is the editor of the Ayco Compensation & Benefits Digest and a speaker at national conferences and corporate meetings on employee benefit issues. Richard was an estate and gift tax attorney at the Internal Revenue Service. He graduated with a BA in History from the University of Pennsylvania. He later received his JD from St. John's University School of Law and his LLM in Taxation from New York University School of Law. This article was published solely for its content and quality. Neither the author nor his firm compensated us in exchange for its publication. 
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