Our strong economy and tight job market can expose companies to a higher risk of losing key talent. As your company evaluates 2019’s performance awards this quarter, it’s a great time to revisit organizational priorities and the needs a Nonqualified Deferred Compensation (NQDC) plan may be able to address:
Retention — Making it appealing for key talent to stay with your organization by recharacterizing certain bonuses as long-term incentive with vesting schedules.
Rewards — Driving organizational results and key employee performance by offering meaningful incentive-based contributions into a long-term incentive plan.
Recruitment — Attracting key performers to your organization through signing and/or stay bonuses tied to a fixed tenure period or business objectives.
Retirement — Supporting retirement preparedness by restoring otherwise lost company match benefits resulting from qualified plan testing and/or compensation limits.
A Win-Win Solution
Well-designed employer contributions to a deferred comp plan can help address these concerns. Employers have more flexibility in addressing their organizational needs since NQDC plans aren’t subject to ERISA coverage, anti-discrimination and vesting requirements.
Where NQDC stands out is it’s versatility – the ability to maintain flexible company contributions and design custom-tailored vesting schedules aligned with your organization’s priorities. As an example, rolling vesting on each award is a modern approach that allows participants to attain vesting milestones more often for a “wins along the way” experience, helping with retention and keeping executives engaged for the next vesting milestone.
To alleviate the concerns of paying out a strong performance bonus on a Friday only to see a talent exit the following Monday, consider the key Win-Win benefits of contributing this year’s incentive awards into a deferred compensation plan. You will enhance the overall benefit to key people through pre-tax awards and enjoy more control over incentive pay than traditional bonus compensation.
Let’s connect and get creative!
Casey Rouse, firstname.lastname@example.org, 952.297.1780