Nolan Financial’s focus is on executive benefit solutions for senior executives, physicians and other professionals. Nolan Financial has the ability to effectively administer a variety of plans for both for-profit and nonprofit organizations, while remaining compliant with the latest legislation.
Nonqualified Executive Benefit Plans
Much of an organization’s success is dependent on its most valuable assets – its executive leadership and employees.
Deferred Compensation Plans
Much of an organization’s success is dependent on its most valuable assets – its executive leadership and employees. High caliber executive talent provides invaluable expertise and experience to an organization.
Qualified plans such as a 401(k) or 403(b) have strict IRS requirements, which severely limit the amount or level of benefits available to highly compensated executives, physicians and other professionals. As a result, employers rely on executive benefits such as nonqualified deferred compensation plans to attract high caliber talent. Offering a Nonqualified Deferred Compensation (NQDC) plan is a flexible benefit solution to supplement and complement existing qualified plans since deferred compensation plans do not have restrictions on the amount or level of benefits allowed.
Typical Objectives:
- Attract, retain and motivate key executives
- Defer more pre-tax compensation than what is possible with a 401(k) or 403(b) plan
Supplemental Executive Retirement Plans
A Supplemental Executive Retirement Plan (SERP) is an agreement between an employer and a key executive, where the employer agrees to provide either a stated amount of retirement income or a set contribution amount to the executive, who may have contributed the legal maximum to their qualified plan contributions. For any SERP, the benefits may be subject to a vesting schedule (cliff vesting or graded vesting) to increase the retentive nature of the plan. Additional features may also be built into the SERP plan, including:
- Pre-retirement death benefits
- Cost of Living Adjustments (COLA)
- Change of ownership / change of control provisions
- Rabbi Trust or Springing Rabbi Trust
Typical Objectives:
- Attract, retain and reward key executives who remain with the organization
- Provide supplemental retirement income for key executives
- Act as a “golden handcuff”
Long Term Bonus Plan
How does a company position themselves to attract and retain the necessary skilled labor in their industry within current regulations? In most cases this employee population would not fall within traditional nonqualified arrangements, such as a supplemental executive retirement plan. This is due, in many cases, to the number of employees that would receive the benefit exceeding the nonqualified regulations and/or compensation would not fit the definition of a “top hat” plan. A Long-Term Bonus Plan (LTBP) allows a company to provide a valuable benefit that can be offered to a larger population outside of the traditional executive and director group.
Mechanics of LTBP
- The employer enters into an agreement with a group of employees to provide an employer contribution to a long-term bonus plan.
- The contributions are subject to a vesting schedule and benefits are paid upon completion of the vesting period.
- In order to avoid being subject to ERISA, monthly or annual installments may be acceptable as long as the total vesting and payout period is no more than 10 years.
- The contributions are not currently taxable to the participants and account earnings accrue on a tax deferred basis.
- When the benefit is distributed, it becomes tax-deductible to the employer and reportable as income to the participants.
- Benefits remain subject to claims of creditors of the employer until paid out to the participants.
Bank Owned Life Insurance
Bank-Owned Life Insurance (BOLI) is an institutionally priced, OCC approved alternative investment designed to help banks offset the rising cost of employee benefit expenses as well as diversify their portfolio holdings. A bank purchases BOLI on the lives of its top executives and is the owner and beneficiary of the BOLI policies.
As part of our best in class service, Nolan Financial offers BOLI management and oversight. Our BOLI knowledge and management combined with the services of The Pangburn Group offers our clients the added protection they deserve.
BOLI provides several key advantages:
- Stable and low risk competitive yields
- Minimum interest rate guarantees
- Tax deferred earnings, which get reported through the profit and loss
- Highly liquid balance sheet asset, with no surrender charges
- Low maintenance asset management
Plans for Tax-Exempt Organizations
Tax-exempt organizations face unique challenges when designing compensation programs for physicians and/or executives. These organizations must remain sensitive to cash flow constraints while offering plans that deliver on three fronts – attracting, retaining and motivating highly compensated physician and/or executive talent. Nolan Financial works closely with its clients to design plans that meet an organization’s unique goals and objectives. Nolan Financial also spends considerable time and resources educating Plan Sponsors and Plan Participants on the intricacies of their nonqualified executive benefit plan so they can maximize the plan’s features and benefits. Although there are numerous options for tax-exempt employers to offer supplemental retirement benefits to their highly compensated employees, the four most common are 457(b), 457(f), Section 162 (Roth Hybrids), and Section 83.
457 Plans
457(b) Plan
457(b) is an “eligible” nonqualified deferred compensation plan for tax-exempt organizations. The structure is simple and largely mirrors the provisions, including limits, of qualified plans such as 401(k) or 403(b) plans.
This type of plan allows participants to defer compensation on a pre-tax basis, subject to certain deferral limits. Participants’ account balances have tax-deferred growth potential with ordinary income taxes due upon distribution.
The major difference is that unlike qualified plans, deferrals under 457(b) are subject to creditors of the corporation. Although 457(b) plans are predominantly used for employee deferrals, it is acceptable to allow employer deferrals.
Typical Objectives:
- Attract, retain and motivate key employees
- Defer more pre-tax compensation than what is possible with a 401(k) or 403(b)
457(f) Plan
457(f) is an “ineligible” nonqualified deferred compensation plan. 457(f) plans allow unlimited pre-tax deferrals and are predominantly used for employer contributions. This structure requires that the employer place a predetermined “vesting” schedule on the participant’s account. It also requires that the account be subject to a “Substantial Risk of Forfeiture” (SRF). Employers use these plans because of the inherent employee retention value.
Typical Objectives:
- Increase retention of key employees through vesting schedule (golden handcuffs)
Supplemental Executive Insurance Plans
A key component of a comprehensive, competitive benefit program often includes supplemental life and disability insurance. More and more organizations are providing these options to their executives and other key employees to complement their existing group benefit programs. Group benefit plans alone often cannot provide the level of coverage highly compensated executives really need.
As the U.S. population continues to age, Supplemental Executive Insurance Plans will become even more important in the coming years.
Did you know?
- In the United States, a disabling accident occurs on average once every second.**
- Seven out of ten American households report that they would not be able to pay their normal living expenses should a wage earner become disabled for six months.***
Typical Objectives:
- Attract, retain and motivate key employees