FAQs – Frequently Asked Questions
How do these plans differ from qualified plans?
In all deferred compensation plans, the money that will be paid to an executive in the future is “at risk”. Should the employer liquidate because of bankruptcy (Chapter 11), or reorganize under bankruptcy (Chapter 7), and the employer has not segregated these funds in a Rabbi Trust, then the employee will be a general creditor of the corporation.
Why are these plans so prevalent today?
The number of employees that remain with a single company for their lifetime is almost non-existent today and the costs to train new employees, or replace profitable ones is continuing to increase. As such, many employers are trying to find a way to keep their key employees, and have the most flexibility in doing so.
Can I include anyone that I want in the plan?
No. These plans are not for the rank and file employee and the employer must identify and offer these plans only to owners, management or highly compensated employees.