EXECUTIVE COMPENSATION STRATEGIES
While many executive-level candidates may lean toward an employment offer with the highest base salary, offering other compensation incentives can boost the appeal of your offer and reinforce their desire to stay with your company. We can work closely with you to devise a strategy for base benefits, bonuses, and long-term incentives.
DEFINED BENEFIT PLANS
Defined benefit plans are another great way to attract qualified employees. A complement to existing 401(k) plans, this tax-deferred account is funded by the employer and set up to guarantee a specific monthly benefit or payout for its employees at retirement (commonly known as a pension plan). Any size business can offer defined benefit plans to provide retirement security for employees and maximize benefits to owners nearing retirement age.
EXECUTIVE BONUS STRATEGIES
Executive bonus strategies give your key executives an incentive to stay with your company. Under an executive bonus plan, you, the employer, pay a tax-deductible bonus to select employees. One strategy involves the bonus being used to pay the premium on a life insurance policy. Employees have full rights to the policy and may take money from the policy’s cash value on a tax-preferred basis. If they die, the death benefits are payable to their named beneficiary.
Policy loans and withdrawals may create an adverse tax result in the event of a lapse or policy surrender and will reduce both the cash value and death benefit. Please keep in mind that the primary reason to purchase a life insurance product is the death benefit.
Employer match is a type of executive compensation strategy. When employees contribute a specified percentage into a qualified plan, you, the employer, can then match that contribution up to a certain percentage of the employee’s salary. Employer match can be a great strategy for recruiting key talent and fostering loyalty with key employees.
NON-QUALIFIED DEFERRED COMPENSATION
Another way to supplement a 401(k) program is through non-qualified deferred compensation (NQDC). A NQDC plan is an executive compensation strategy that reduces an employee’s current taxable income and provides an agreement to pay benefits at a point in time in the future when a triggering event occurs. Through NQDC plans, employers can defer bonuses, salaries, and other compensation for a later date, deferring the tax owed by the employee on the extra income as well. There are several ways to set up NQDC plans. It is important to work with a professional who can outline benefits and considerations of each strategy so you can make an informed decision.
PROFIT-SHARING ALLOCATION METHODS
Through a profit-sharing provision, you, the employer, can choose each year whether to make a contribution to your employees’ retirement plans. Profit sharing gives employees a share in the profits of a company based on your business’s quarterly or annual earnings and allows you to decide how much you want to allocate to each employee.
As one of the oldest financial firms in the Upper Midwest, Winter & Associates understands the importance of leaving a legacy. We’re passionate about helping business owners maximize their success and achieve their long-term objectives. For more information about our company and services, please give us a call at 651-414-5000, or fill out our contact form, and we’ll be in touch soon!