Retirement Plan Services

Non-Qualified Plans

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Non-qualified retirement plans are frequently offered to highly compensated employees and executives as a way to supplement beyond the limitations and restrictions on the qualified retirement plans. Employers view these plans as a valuable employee retention tool for key executive and management personnel. Watkins Ross assists clients in valuing and maintaining non-qualified plans and we work with clients’ legal counsel in determining how to best coordinate the benefits of the non-qualified with current and past qualified retirement plan offerings.

Non-Qualified Plans with Watkins Ross

There are several types of non-qualified plans (NQP) an employer may offer:

Individual Account Plans: These plans allow employees to defer receipt of current income or an employee may credit a specific percentage of an employee’s current salary. These plans typically credit some type of “earnings” to the employee’s account.

Phantom Stock Plans: The plan credits employees with a certain number of “hypothetical shares” which the employee “redeems” at a later date.

Stock Appreciation Plans: This plans credit an employee with the net appreciation on a specified number of “performance shares”.

There are also some key differences between a non-qualified deferred compensation plan and a qualified retirement plan. In a NQP, the employer may not deduct the deferred compensation at the time the benefits are earned. Instead, the employer’s deduction is postponed until the employee receives the compensation. The amounts deferred in a NQP are also not protected in the event of the employer’s bankruptcy. Therefore, if the employer defaults, there are no assurances that the deferred amounts will be paid to the employee.

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