NonQualified Benefit Plan Examples

Benefit Plan Financing Strategies

Benefit financing strategies fall into three broad categories: unfunded, informally financed and formally funded. The distinction is vitally important because the tax and ERISA consequences vary significantly depending on the strategy you have selected. An unfunded plan is financed by an employer on a "pay-as-you-go" basis with no assets set aside to fund its obligation. An informally financed plan is one in which the employer sets aside and accumulates assets to meet its future benefit obligation, but these assets remain in the general assets of the employer subject to the claims of its creditors. Finally, a formally funded plan is one in which the employer sets aside specific assets, often in an irrevocable trust or escrow account, to shield them from its general creditors.

Informally financing benefit plans can generate numerous benefits, from providing peace of mind for the participants to improving the economic efficiency of the plan. The professionals of TCG can help you determine which financing strategy makes the most sense for your situation. Regardless of which financing strategy you choose, TCG can assist you with the design, implementation and ongoing administration of both your customized benefit plan and financing strategy. Contact The Cochlan Group.