Looks
like they already got the benefits changed for future employees, get
ready for the "Golden handcuffs" or deferred comp plan.
(Deferred compensation is also sometimes referred to as deferred comp,
DC, non-qualified deferred comp, NQDC or golden handcuffs. Deferred comp
is only available to senior management and other highly compensated
employees of companies. Although DC isn't restricted to public
companies, there must be a serious risk that a key employee could leave
for a competitor and deferred comp is a "sweetener" to try to entice
them to stay. If a company is closely held (i.e. owned by a family, or a
small group of related people), the IRS will look much more closely at
the potential risk to the company. A top producing salesman for a
pharmaceutical company could easily find work at a number of good
competitors. A parent who jointly owns a business with their children is
highly unlikely to leave to go to a competitor. There must be a
"substantial risk of forfeiture!!!!!!!!," or a strong possibility that
the employee might leave, for the plan to be tax-deferred. Among other
things, the IRS may want to see an independent (unrelated) Board of
Directors' evaluation of the arrangement.)
Don't know where that description of "Deferred Compensation" came from but it is not factual. Well, it's not completely factual (there is a bunch of stuff left out). It has nothing to do with "public company" and nothing to do with "senior management and other highly compensated employees". The tax deferment is based solely on the fact that the money will be taxed when paid (it is still "owned" by the employer, but it is in escrow until the employee is separated).
ReplyDeletealso read IRS pub 4406.
ReplyDelete