Why Executive Benefits?
Because the playing field isn't necessarily all that level.
While it was created with the best of intentions, ERISA places significant limits on benefits available to key senior managers and executives.
Executive benefits programs have been developed to compensate for this difference and to broaden the reach and perceived value of companies’ cash compensation. These programs are not subject to ERISA limitations and can offer significant advantages in wealth accumulation via tax savings. (For more information, see our introduction to non qualified benefits plans).
RIGHT: At higher compensation levels, qualified plan benefits represent a progressively smaller portion of the income needed to maintain an accustomed quality of life. Predictable lifetime liquidity events demand far greater funding than qualified plans can provide for highly compensated people. For management, the qualified plan provides the basic necessities; the nonqualified plans provide the quality of life.
Executive benefits make up the difference, allowing companies and managers, rather than the IRS, to establish their own compensation and retirement income objectives.
RIGHT: Compare a contribution to a personal investment in a taxable security structure, versus an equivalent investment in a nonqualified deferred compensation plan.
Assuming the same rate of return, such an executive benefit plan will provide substantially more replacement income for the executive, even if the balance is paid as a lump sum. The deferred compensation advantage accelerates when payments are made over a period of years. Let us show you the math.