Incentivizing Key Employees...A Tailored Solution

In order to attract, retain and reward key executives, it is often prudent to provide key employees with additional benefits. Provided certain rules are followed, the ERISA and IRS rules allow employers to provide certain benefits to key personnel that other employees are not eligible to receive.

These benefits are often tied to company performance measures such as gross revenue, cost containment, net profits or the like. A great feature is that Non-Qualified plans can generally be tied to any performance metrics that your company deems important.

Another benefit to Non-Qualified plans is that they generally are not taxable to the key employee until they are actually paid. Thus, an executive could “earn” significant amounts under the plan during employment and only be taxed on those amounts when actually paid in retirement.

How Epiphany Law Can Help

The beauty of a non-qualified plan is that it provides flexibility to your company to incentivize whatever behavior you see as key to your success. However, flexibility is a double-edged sword. With flexibility comes a great need for an experienced business law attorney.

Epiphany Law understands how to tailor a plan to your unique business needs. We also understand the complexities of ERISA and tax law. When you are looking to craft a plan to reward your key players for taking your company to the next level, look no further than the expert attorneys at Epiphany Law.

Questions & Answers about Incentivising Key Employees

Q: Why are these plans called “non-qualified?”
A: Non-Qualified refers to their status under ERISA. In general, qualified plans are subject to extremely complex disclosure and tax rules. In addition, qualified plans generally must be available to all employees. Thus, the term “non-qualified” means two important things to your company: relatively simple rules and the ability to tailor the plan to key employees.

Q: Can I refuse to pay out benefits if the executive embezzles from the company?
A: Yes, if the plan provides. Often, non-qualified plans will have “golden handcuff” provisions. This means that in the event that the key employee does certain bad things, such as being fired for stealing money from the company, benefits can be withheld. This is another area where flexibility is allowed to protect the Company’s interests.

Q: What happens if the key employee dies?
A: Non-qualified plans generally provide for a payout in the event of a key employee’s untimely death. Usually, this risk will be covered through the purchase of life insurance on the key individual. Epiphany law works hand-in-hand with your financial planner to ensure that this risk, and other similar risks, are covered in advance.