Executive benefit plans have their advantages | VailDaily.com

Executive benefit plans have their advantages

Jeffrey Apps and Tracy Tutag
Vail, CO, Colorado

Business owners face many challenges, including the expense of operating a business, finding and keeping qualified employees and keeping pace with economic changes to name a few.

There are several opportunities available to business owners that are designed to reward executives and employees at the owner’s discretion. More small business owners today are turning to executive benefits ” also called non-qualified plans ” to help fund retirement programs for themselves and key employees. Non-qualified plans are so-called because they do not meet the requirements of the Internal Revenue Code or ERISA for tax-qualified plans, such as 401(k)s or defined benefit plans.

Executive benefit plans, which may include bonus, split dollar and deferred compensation plans, may have more flexible funding options, vesting requirements, distribution guidelines and reporting requirements than qualified plans. These plans allow business owners to make decisions regarding which employees are eligible for the programs.

By contrast, tax-qualified plans offer a number of tax benefits but can be expensive to administer and have complex regulatory requirements. They also must generally cover all eligible employees of a business who wish to participate. If a small business owner wants to provide a retirement benefit for himself and a few select employees, a qualified plan generally won’t work if the business has other employees.

Executive benefits are designed for highly compensated employees and key people. These plans allow the employer to choose the select group of employees that are eligible to participate in and receive benefits from the plan. This can create the opportunity to reward key employees, provide powerful incentives for those employees to remain with the company and fill gaps where other benefits may fall short. Executive benefits can also be structured to provide a beneficial arrangement to the business owner. These flexible benefit plans can help meet the needs of a small business at a competitive cost with fewer administrative requirements.

Depending on the plan and its structure, funding may be the responsibility of the employer, the employee, or shared. Tax benefits may be available for some types of plans. For more information, contact your financial professional and your tax adviser.

Jeffrey Apps and Tracy Tutag sell securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and offer annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached at 926-0601 or tracy.tutag@axa-advisors.com.

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