Attracting and retaining the right employees remains a priority for many organizations. In our latest 401(k)ompass episode, Renn Williams shares in just 2 minutes how non-qualified deferred compensation (NQDC) plans can support these goals. Here, we explore several advantages of these plans and how they can be effectively implemented to keep key employees on board.
Selecting Participants with Flexibility
Unlike traditional retirement plans, NQDC plans allow employers to choose which employees are eligible, without the same non-discrimination requirements. This flexibility lets employers set conditions such as a tenure milestone before employees are vested. This approach supports a company’s goals while rewarding long-term commitment.
Tax-Deferred Asset Growth
NQDC plans offer the advantage of tax-deferred asset growth, allowing contributions to accumulate over time. However, keep in mind that these assets remain an employer asset until they’re distributed to the employee.
Supporting Long-Term Employee Commitment
Sometimes known as “golden handcuff” plans, NQDC options can reinforce an employee’s decision to stay, especially when targeting top talent. This approach can create a mutually beneficial path forward, showing that valued employees are part of the company’s long-term plans.
Tailoring Plan Benefits to Company Goals
One benefit of NQDC plans is the ability to customize. Employers can include performance milestones that reward employees for meeting key targets, such as achieving sales goals or other accomplishments. This flexibility makes it possible to align employee rewards with both personal and company-wide objectives.
By offering customized benefits and encouraging long-term commitments, NQDC plans help companies attract and retain the talent essential for growth.
