Business owners understand that they need to build a solid team of people to further the success of their business. The business owner will either promote employees from within the business or hire new employees who have particular skills, experience, or creativeness to take on more specialized roles and responsibilities in the business.
Some employees will be promoted into executive level positions where they will have decision making power or provide strategic advice to the business owner critical to guiding the business in the future.
It is certain that the title, compensation package, and perks of these key employees will reflect their status among the entire employee population. If one or more of these people leave the business it could prove damaging to the business especially if these key people are hired by a competitor.
This is an important area for you to probe with the business owner. At the very least you will learn how the business owner thinks about the employees and his/her willingness to apply business resources to help them. Most employers are willing to provide a level of benefits to all employees balanced by a reasonable cost expectation. For key employees the business owner may be willing to implement special benefit plans that will provide an incentive to the employee to continue working for a period of time. The same can be said if the business owner is trying to attract new employees for key positions that are critical to the long term success of the business.
NON-QUALIFIED PLANS
Non-qualified plans can be used as a supplement to a qualified plan to provide key highly compensated employees with a source of supplemental retirement income.
Non-qualified benefit plans are arrangements between an employer and a key employee, which provide the key employee with a form a supplemental retirement income or other benefits in addition to standard qualified plans, such as 401(k) plans. The primary reason that business owners establish non-qualified executive benefit plans is to recruit, reward and retain key employees. These plans are designed to give incentive to the key employees to remain working with the business. For this reason they are commonly known as "golden handcuff" plans because the key employee is rewarded in the future for remaining with the business. Non-qualified executive benefit plans have minimal cost to the employer and can help key executives supplement their qualified plan savings. Non-qualified plans are generally not subject to the same tax and labor law requirements (e.g., ERISA) as qualified plans and can be offered to select employees. The retirement benefits paid by the employer generally are income-tax deductible in the year they are paid.
