What we mean by advanced planning at Global View Capital Advisors is providing additional compensation plans for your top executives and key employees with a view to the long-term. Non-qualified plans typically fall outside the scope of ERISA guidelines and other regulations which govern 401(k)s, SEP IRAs, and other group retirement benefit plans. They are usually added on top of a 401(k) to meet the needs of a select group of executives as a way to recruit, compensate, and retain key people. They are a way to provide highly-paid executives with an additional retirement savings option.
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What we mean by advanced planning
Deferred compensation plans, split-dollar life insurance, executive bonus plans and group carve-out plans are the four major types of non-qualified plans that you can put in place, often for people you want to retain but not sell or leave your business to. Each type of plan has specific features which may or may not be applicable to your firm. It is important for everyone involved to understand that this compensation is generally not tax-deductible for the employer, and it is generally taxable to the executive or employee recipient. However, employees can defer taxes until retirement.
Some Basics About Advanced Plans
Deferred compensation plans can be either true deferred compensation, where an employee waits until retirement to receive bonuses or other compensation, or salary continuation, where the employer funds an executive salary to be paid after retirement. Both types are usually tax-deferred to the employee until retirement.
Executive bonus plans are usually a permanent cash value life insurance policy purchased by the company which the employee receives upon retirement. Premiums may be considered compensation and therefore may be tax-deductible for the employer. In some cases, the company may choose to pay a bonus to cover the employee’s taxes which they will owe the IRS upon receiving the policy in retirement.
Split-dollar plans are similar to executive bonus plans, except that the employer and employee divide ownership of the permanent cash value life policy. For instance, the employee may pay for the life insurance or mortality cost and the employer may pay the rest of the premium. Upon death, the employer receives the portion of the death benefit equal to what the company has paid in, while the employee’s beneficiaries receive the balance.
A group carve-out plan is another life insurance strategy where the employer replaces a key employee or executive’s group term life insurance policy over $50,000 and replaces it with a permanent cash value individual policy. Thus, the employee receives $50,000 in tax-free term insurance (this is the typical IRS tax-free limit depending on age), plus a permanent life policy that can accumulate cash value over time.
We will help you analyze whether or not any of these advanced plans make sense for your situation and will present even more pros and cons for your consideration, always with your best interest in mind. Our goal is to win and keep your trust through the decades, and also help you with your own personal finances for the long-term.
Let’s discuss advanced planning.
Even if you are inundated with day-to-day ongoing responsibilities, allow us to save you time by letting our team do the research on your behalf. We have the expertise, experience, and capacity to provide this guidance to you.
Here’s the Best Part:
Our Advanced Planning Recommendations are Complimentary.
About Chad Albano
Chad Albano is an Executive Director and part of the Advisory Board of Global View Capital Advisors. He is a Fiduciary Planner who believes in empowering clients by providing them with education, whether it’s advising individuals and families or executive teams at companies.
In his role at Global View, Chad has 3 main areas of focus: Planning for Baby Boomers and pre-retirees, helping companies improve their 401(k) plans and protecting plan sponsors from fiduciary liability, and working with business owners and management teams fill the gaps in their succession plans, key person protection, employee retention and incentive plans.
Prior to his current role, Chad had over 10 years’ experience in various roles within corporate finance and accounting, ranging from tax, financial reporting and planning, distribution, and manufacturing, so he understands the demands on business executives and owners. Chad holds a Bachelor of Business Administration degree in accounting from the University of Wisconsin – Whitewater and passed the Uniform CPA Exam in 1999.
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