409a Nonqualified Deferred Compensation

NQDC, DCPs, SERPs, and other strategic tools

A nonqualified deferred compensation plan (NQDC) is an executive’s most effective, tax-deferred wealth-accumulation strategy. When a company, as the plan sponsor, integrates executive benefit plans into total rewards, it aligns the objectives of talent and stakeholders in a powerful and cost-effective way.


NQDC Plans Serve Organizations

NQDC plans provide employers powerful leverage for recruiting, retaining, and rewarding the key talent that enables the organization to achieve its goals, maintain stability, and satisfy board members and stakeholders.
Using NQDC, companies can create phantom shares and provide an ownership experience or create opportunities for key executives to be potential future owners.
Organizations can
  • Inspire/influence the behavior of key performers by customizing contribution and vesting schedules to establish performance rewards
  • Utilize discretionary employer contributions to help fulfil the organization’s unique needs
NQDC Plans Serve Executives
A nonqualified deferred compensation plan can afford you freedom to enjoy your earnings and/or pay taxes on those earnings at the time that is most beneficial for you and your family. Executives can choose to take payouts to correlate with personal goals such as buying a vacation home or paying for a child’s college tuition. Typically, income taxes are not paid until the tax year the money is actually received, however, you should always consult your own tax, legal, and accounting advisors. Contact Fulcrum Partners. Find out how a NQDC plan could enhance your financial future.

Deferred Compensation Plans//DCPs

The More You Earn, the Greater the Gap

As a highly compensated executive, you’re acutely aware that there’s a gap between the combined amount of your social security benefits and your qualified retirement benefits versus the amount of savings you will need to replace your current income.
retirement income gap
40% of key executives identify that they are concerned about the gap between their current income and their projected retirement income.
Qualified retirement plans, IRAs, and 403(b) plans have limits on contribution amounts. Let Fulcrum Partners show you how deferred compensation plans can provide you meaningful options and opportunities, including 401(k) “restoration” to bridge the replacement income gap.

“Section 409A applies to compensation that workers earn in one year, but that is paid in a future year. This is referred to as nonqualified deferred compensation. This is different from deferred compensation in the form of elective deferrals to qualified plans (such as a 401(k) plan) or to a 403(b) or 457(b) plan.”

Supplemental Executive Retirement Plans//SERPs

Well-balanced risk and reward. You recognize this combination as a cornerstone in an effective compensation program. While organizations have traditionally used (and sometimes overused) stock-based incentives to motivate and retain valued executives, the ever-changing economy has brought to light flaws inherent in many equity programs. Stock price alone does not always correlate with either executive performance or sustainable long-term shareholder value. And executives may have taken excessive risks, contrary to the long-term fiscal interests of the company. A supplemental executive retirement program, (SERP) can help promote a more diversified, portfolio-style approach to executive rewards.
Use SERPs to Balance the Overall Risk/Reward Equation
  • Help executives maintain valued equity ownership within a balanced investment portfolio
  • Retain top talent in challenging times through extended vesting of a portion of total pay
  • Facilitate clawbacks (money or benefits distributed and then taken back as a result of mitigating circumstances) of payouts based on discredited financial statements
Find out how Fulcrum Partners can help you and your organization balance interests and reduce incentive compensation risk.