Articles
Should You Put
Your Family Member
on the Payroll?
Accounting for
Computer Software
Costs
Receiving Employer
Stock from a
Company Plan
Sections
Sponsor
- Plan contributions or benefits usually are based on the amount of an employee's compensation. By law, you won't receive any credit for 1998 earnings in excess of $160,000.
- "Highly compensated" employees often can't contribute the maximum limit to a 401 (k) plan ($10,000 in 1998) because of special nondiscrimination tests all 401 (k) plans are required to pass.
Because of rules like these, executives may be hard put to build an adequate nest egg through qualified plans alone. More and more companies are sponsoring "nonqualified" deferred compensation plans to help fill in the gaps for their highly paid employees.
Nonqualified pans are easy to set up and to operate. Companies can pick and choose whom they want to include in the plan without worrying about tax law restrictions. The tradeoff for this simplicity is that the company receives no tax deductions with respect to the plan until employees receive the benefits as taxable income. With a well-designed plan, employees can delay this day of reckoning for a long time--typically until retirement.
