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Deferred Compensation
Deferred Compensation Plans: Retain and Reward Key Executives
Top executives are critical to your company’s success, but standard retirement plans like 401(k)s often can’t meet their long-term savings goals—or your retention needs. A Deferred Compensation Plan offers a flexible, tax-advantaged way to reward your leaders and keep them invested in the future of your company.
At SSG Companies, we design
nonqualified deferred compensation (NQDC) plans for companies across Louisiana, Texas, Arkansas, and the Gulf South. These plans allow select executives to defer income beyond IRS contribution limits while giving you a powerful tool to retain and incentivize the people driving your business forward.
What Is a Deferred Compensation Plan?
A selective employee fringe benefit used to recruit, retain and reward talented, key employees. It may used in conjunction with, or in place of, a qualified retirement plan.
A Deferred Compensation Plan allows executives to set aside a portion of their salary, bonus, or incentives for a future payout—often at retirement. Unlike qualified plans, these arrangements:
- Do not have IRS contribution caps
- Can be offered to a select group of key employees
- Can be tailored with vesting schedules, performance incentives, and custom payout terms
Key Benefits for Companies and Executives
Greater Savings for Executives
Allows highly compensated employees to defer income taxes and build additional retirement savings beyond what qualified plans allow.
Integration With Other Benefits
Can be combined with Supplemental Executive Retirement Plans (SERPs) or Split-Dollar Life Insurance for a comprehensive strategy.
Design Flexibility
You decide who participates, how much can be deferred, and under what conditions the benefit is paid.
Retention Power
Deferred benefits can be forfeited if the executive leaves early, encouraging long-term loyalty.
The Process
1
You select the executive(s) to whom the plan will be offered.
2
You enter into an agreement with the executive whereby:
- The executive agrees to defer part of his annual income until retirement, disability or death (Salary Reduction Plan).
or
- The company sets aside funds to provide the deferred compensation benefits. This is a supplement to the employee's income (Salary Continuation Plan).
3
You select a funding vehicle for the agreement. Life insurance or mutual funds are typically used.
4
The corporation is the owner of these assets.
5
At the executive's retirement, death or disability, the company makes the agreed-upon deferred compensation payments.
6
All deferred compensation payments are tax-deductible to the company when paid to the executive.
7
All deferred compensation payments are considered ordinary income to the executive and his beneficiaries and subject to federal income taxes.
8
If life insurance is used, at the executive's death (either before or after retirement), the corporation receives the death benefit proceeds of the life insurance policy. These proceeds can be used:
- To fund a survivor's benefit payout to the executive's beneficiary in the event death occurs prior to retirement
- To reimburse your company for the funds already paid out on a "cost recovery" basis
- To continue the executive's entire retirement benefit, or the remainder of it to the beneficiary.
9
If the executive resigns from the company or is discharged for "cause", he forfeits all benefits provided under the plan. (If the plan allows for "vesting" of benefits, this may not apply)
10
In exchange for the promise made by the company, the key executive may be asked to:
- Remain with the company for a specified number of years (usually until retirement).
- Act as a business consultant to the company after retirement.
- Refrain from activity of a competitive nature upon retirement or leaving the firm.
Why Work With SSG Companies
We’ve spent decades helping companies in Louisiana and the Gulf South design executive benefits that align with their culture and long-term goals. Our experience allows us to create plans that motivate key employees without placing unnecessary strain on company resources.
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Ready to Build a Deferred Compensation Plan?
Your top leaders are too valuable to risk losing. Let’s design a plan that rewards loyalty, encourages performance, and supports your company’s future.