Plan to Keep Key Employees
In today’s market, retention of key employees is a primary concern for most business owners. Many business owners seek innovative ways to keep their top producers engaged, while also saving themselves the hassle of unwelcome compensation programs and the recruitment of new talent. Loss of a key employee can result in a decrease in sales and productivity and an increase in costs of recruiting, hiring, and training.
What can companies do?
Companies can consider offering non-qualified deferred compensation plans. This is a viable option for top producers and high-leveled employees to improve their retirement benefits. Non-qualified deferred compensation may reduce current adjusted gross income levels for key employees who are relying on the program to abate:
- Income taxes
- Capital gains tax
- Medicare surtax
A deferred compensation plan can provide key employees with a beneficial tax-deferred savings vehicle through employee and/or employer contributions. Businesses can benefit greatly with a strategy to retaining key employees for the long term.
Step 1: Employer selects which key employees qualify to earn a deferred compensation plan.
Step 2: An attorney examined written plan agreement is formed between the employer and key employee listing contributions and benefit amounts.
Step 3: The employer determines financial vehicle for the key employee, which serves as a funding tool for the plan. The amount of contribution will be provided under the deferred compensation plan.
Step 4: Employer makes agreed-upon contributions to the employee’s plan. The employee may qualify for benefits such as retirement, disability or survivor benefit, per the plan agreement. These payments are typically tax deductible to the employer when paid, and are taxed as ordinary income to the employee.
Evaluate your strategy with Lions Assurance Financial and learn about business opportunities that will benefit your company. Lions Assurance Financial helps businesses, together with their tax and legal advisors, to develop optimal financial solutions for success.