Chapter 15

Nonqualified Deferred Compensation Plans

Introduction

So far you have primarily received the message that employer-sponsored plans cannot disadvantage rank-and-file employees. There have been a few notable exceptions with plans that are integrated with Social Security, cross tested, or age weighted. Another significant exception is the opportunity for executives to defer some of their otherwise current compensation into a nonqualified deferred compensation plan.

The goal of these plans is to shift income from the current period down the participant’s timeline and perhaps all the way until retirement. There are certain actions that could be taken that would completely destroy this goal and render all benefits taxable in the current ...

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