Nonqualified Deferred Compensation Retirement Plans: 

Many experts suggest retirees need approximately 80 percent of their pre-retirement income in order to maintain the same standard of living in retirement. The following chart details the anticipated percentage of income replaced at retirement from Social Security and qualified plan benefits. As income increases, the percent of income replaced at retirement decreases.

Adding a nonqualified plan to your retirement program can be an attractive retirement savings alternative for business owners and select key employees. It can offer an additional way for owners and individuals to save, without the limitations and restrictions placed on qualified plan contributions. Plus, depending on the type of nonqualified plan and financing options selected, you can take advantage of tax benefits not available with other savings and investment options. Nonqualified plans are helpful to key employees looking for additional ways to fund retirement.

What causes the gap?

Qualified plans, 403(b) plans and Individual Retirement Accounts (IRAs) have limits on the amounts that can be contributed to them.  Also, qualified plans and 403(b) plans are subject to coverage and non-discrimination testing that may limit both employee and employer contributions to the plans.

Nonqualified deferred compensation plans can be effectively tailored to help solve the retirement income replacement gap. A properly designed and serviced plan helps reduce the challenges created by qualified plan limits. Nonqualified solutions give employers the ability to tailor a plan to meet the needs of the organization and select key employees.

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