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Keys To Successful NQDC Plans At Small Companies:
A View From The Trenches

Small companies can use nonqualified deferred compensation plans just like those of large companies. They can offer the same advantages of tax deferral and savings for any highly compensated executive or key employee. This article discusses the special issues a privately held company faces with an elective deferral NQDC plan.

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Key Points in This Article
After deciding who can participate, and whether salary and/or bonuses can be deferred, the company must choose from a range of NQDC designs. In almost all cases, simple is better.
Plan communication is critical. In the most successful NQDC plans, the plan sponsor participates in education and communication.
Corporate-owned life insurance (COLI) is often used to fund the plan. Other choices include not funding the plan at all, or using mutual funds.