It is important to the success of a closely-held company to have a well thought out compensation plan for key non-owner executives and managers. Just because the owners of a closely-held company may not be able to reward their non-owner executives with stock doesn’t mean that they can’t have an executive compensation plan that is meaningful and rewarding.
For example, a non-qualified deferred compensation (NQDC) plan can be used by a closely held business to provide members of the senior generation with death, disability, and retirement benefits. An NQDC plan may be particularly useful in situations where the members of the first generation have transitioned the business to members of the next generation and are no longer receiving compensation. An NQDC plan also can ensure that key employees remain with the business during the transition period—a so-called “golden handcuff.” Because life insurance offers tax-deferred cash value growth and tax-free death benefits, it is the most popular vehicle for “informally” funding assets to offset the NQDC plan liabilities.
One of the key components to a successful NQDC is administration. GWE has access to some of the premier record keepers in the field, helping our clients achieve their goals.