NonQualified Benefit Plan Examples

401(k) Excess Plans

A 401(k) plan is a benefit plan funded by the employee. Oftentimes, a company will match a percentage of the employee's contribution, usually 50%, up to a specified amount. The contributions deferred into the account are not taxed. Therefore, the overall 401(k) account grows tax-free until the time of withdrawals at retirement.

With an employer contribution match and pre-tax salary contributions, 401(k) plans remain a viable retirement benefit vehicle for many employees, but not for all employees.

Highly-paid executives, because of statutory yearly limits on tax-deferred contributions imposed by the Internal Revenue Service, face 401(k) discrimination and have contribution limits placed against them toward their 401(k) accounts. In 2006 or thereafter, that limit is $15,000 -- not much in the way of deferrals for a highly compensated executive.

This can have a devastating impact on the efforts of a company to recruit and retain the cream of the crop in executive talent. However, there is a benefit package that overshadows the shortcomings of a 401(k) plan.

A 401(k) Excess Plan allows an executive to defer amounts in excess of the limitations set under a typical qualified plan.

For a select group of executive management, the option of a 401(k) Excess Plan, a salary-deferral plan tailored to the executive's special compensation needs, offers many advantages. Not only do these plans carry more flexibility for high-salaried employees, but they also solve two looming issues: 1) breaking through the limitations of a typical 401(k) plan and 2) avoiding the provisions subjected by ERISA. Overall, a 401(k) Excess Plan gives the executive the option of using the funds as an additional pension, as a savings plan or as both. They also assist companies in remaining competitive in their employment strategies and benefit offerings.

The Cochlan Group specializes in the design, implementation and administration of 401(k) Excess Plans. Due to our unique approach in creating benefit plans streamlined around attracting, retaining and rewarding key executives, companies rely on The Cochlan Group for its 401(k) Excess Plan expertise. Contact The Cochlan Group.