Qualified Retirement Plans —
“Bread and butter” retirement planning…and beyond…
Most people in this country, if they are covered by any retirement plan at all other than Social Security, are covered by what’s known as a “qualified” retirement plan. “Qualified” means that the retirement plan is regulated by the Employee Retirement Income Security Act (ERISA) and, consequently, the retirement plan tax-advantaged. Qualified plans include “Defined Benefit Plans” (pensions) and “Defined Contributions Plans (including IRAs and 401(k)s).
In order to get around certain ERISA requirements, some companies have implemented “Non-Qualified Deferment Compensation” (”NQDC”) Plans. Most notably, NQDC plans can be implemented in a discriminatory manner for key executives, which is why, at first glance, the topic might intrigue a small business owner. However, small business owners rarely run into the concept due to the fact that NQDC plans are not usually a good fit for owner/employees.
But even if NQDC plans were a good idea in the past, in 2004, NQDC plans were turned on their heads by Congress with the passage of The American Jobs Creation Act of 2004. This law made “old school” NQDC a painful tool with the new restrictions and tax consequences of having an old school NQDC plan.
Because old school NQDC plans are no longer viable, they will not be discussed in this article. If you have old school NQDC plan, you should know that, if those plans were not terminated or frozen prior to the end of 2006, the negative tax consequences to the employees with those plans will be dramatic.
If you’ve been wondering how to sock away more for retirement — especially if you are highly-compensated or you are late in your retirement planning — we have many safe, legal ways for you to give your retirement savings a boost. We invite you to look around our site, and explore some of our “think-outside-the-box” strategies.
We think you’ll be intrigued and delighted, as many of our clients have been. You can have your situation reviewed to see if any of our unique strategies might fit you by calling for a free, no-obligation consultation at 1 (805) 376-8070. Or sign up for our consultation and tell us what your questions are, and then we’ll get back to you quickly with the answers.
