Business Insurance Producer Marketing Guide NONQUALIFIED DEFERRED COMPENSATION PLANS IFS-A073189 Ed. 07/07 Exp. 07/09
NONQUALIFIED DEFERRED COMPENSATION PLANS Concept Summary Nonqualified Deferred Compensation Plans Recognizing the Market and Making the Sale Executive benefits represent an important part of the total executive compensation package. Executives typically participate in employer sponsored benefit plans intended to include all employees. The problem is that these broad-based plans are designed to meet the needs of the average employees and executives are not average. Executives have special needs and create unique challenges for employers who wish to recruit and retain talented individuals. Top tier executives have a tremendous impact on the performance and wellbeing of the business. A successful business cannot afford to lose capable executives to competitors. To minimize this possibility, employers need to adopt attractive supplemental executive benefit plans that bind the executive to the business by augmenting benefits provided under broadbased plans. A nonqualified plan using life insurance is the answer for many businesses. What exactly is a nonqualified deferred compensation plan? Simply put, it is a contractual agreement between an employer and certain key employees in which the employer makes an unsecured promise to pay a benefit at some future date for services performed currently. They are referred to as nonqualified plans because they do not have the same tax advantages as a qualified plan. With a qualified plan, the business is entitled to an immediate income tax deduction on sums contributed to the plan, whereas in a nonqualified plan the business cannot deduct the deferred compensation benefits until they are paid to the executive and included in taxable income. For the executive, properly structured nonqualified plans are comparable to qualified plans in that the executive can elect to defer, on a pre-tax basis, current salary dollars until a later date such as retirement. Like a qualified plan, any deferral and earnings credited to these sums accumulate on a taxdeferred basis until paid at a later date. When benefits are paid to the executive, they are taxed as ordinary income. 1 1 As a result of the enactment of IRC 409A, most nonqualified plans are now subject to new restrictions on elections, distributions and funding. Participants in nonqualified deferred compensation plans that fail to comply with the new rules will be subject to current taxation on all deferrals and significant penalties. Clients should consult with their tax and legal advisors before implementing a nonqualified plan to ensure compliance with these rules. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 2
NONQUALIFIED DEFERRED COMPENSATION PLANS Nonqualified plans are specifically designed so that they are not subject to the numerous restrictions imposed on qualified plans by the Employment Retirement Security Act (ERISA) and the Internal Revenue Code (IRC). This leaves the employer free to pick and choose who participates and to custom design benefits to meet the needs of each participant. A wide variety of nonqualified plans exist today. The focus of this marketing guide will be on nonqualified plans that provide executive retirement income and capital accumulation benefits. Two basic plans will be discussed and illustrated: Deferral Plans, and Supplemental Executive Retirement Plans (SERPs). Overview of Deferral Plans. Deferral plans are used primarily to: Defer receipt of income until another time when there is a greater need for income, (e.g., retirement, disability, college funding needs, etc). Reduce current income tax by deferring salary or bonuses to the future. Deferral plans are generally employee-paid plans. However, like their popular qualified plan counterpart the 401(k) plan, nonqualified deferral plans are sometimes designed to provide an extra incentive to participants through the use of matching employer dollars. Overview of Supplemental Executive Retirement Plans. Also known as Supplemental Income Plans (SIPs), SERPs are primarily used to: Provide benefits that executives may not otherwise receive because of qualified plan limitations. Provide full benefits to short-service executives. Provide full benefits at an earlier age. Provide more generous benefits to top tier executives. In short, the basic function of a SERP is to provide a layer of benefits, which, when added to other retirement benefits, brings an executive s total retirement income to a predetermined level. SERPS are generally employer-paid benefit plans. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 3
The Market For a nonqualified plan to be a successful recruitment and retention tool, plan participants who hold an unsecured benefit need the assurance that the business has a high probability of continuing after the retirement of the current management and is not likely to face insolvency. While a nonqualified plan may be established between almost any type of business entity and its executives a business that has stability and continuity is key to the plan s success. Choosing the Right Entity. An important step in deciding to implement an executive benefit plan is evaluating the tax effect of the plan and any funding vehicle on the business entity and its owners. One of the primary design goals of a properly structured nonqualified plan is the ability of the participant to avoid current income tax on deferral contributions, employer sums or the earnings on these amounts. It is important to remember that the deferral of income by a participant has an offsetting effect on the business. The business loses a current compensation deduction since amounts accrued under a nonqualified plan are not deductible by the business until the year in which they are included in the participant s income. Additional tax effects may result to the business where an informal funding vehicle is used to track the plan liability. How these transactions impact the business and its owners is directly tied to the tax structure of the business entity implementing the plan. The following is a brief summary of how various entities are affected by the implementation of a nonqualified plan: C Corporations. The best prospect for a nonqualified plan is a regular C corporation (C corp) where the business and the shareholders are treated as separate entities for income tax purposes. This allows the plan and its tax effects to be segregated from the owners (i.e., shareholders). In addition, since the Corp is a separate taxable entity, business owners have the opportunity to use tax bracket leverage to make use of the lowest and most efficient tax bracket. Where the corporation is in a lower tax bracket than the owner/shareholder, nonqualified plans make sense. By using a nonqualified plan, income can be left in the corporation, deferring income tax at the owner s current higher tax bracket. Later, when the benefit is paid (often at retirement) the owner may have the advantage of being in a lower tax bracket. However, care must be taken where the owner is a controlling shareholder and is in the position to direct the corporation to do his bidding. See discussion entitled: Sole Shareholder/ Controlling Shareholder C Corps. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 4
Public C Corps. At first glance, a public C corporation might seem to be the perfect candidate, since it is less likely to rely on the talents of a few key shareholders for survival and its financial stability is public record. However, a sale to a public C corporation may be time consuming. Because corporate records are made public, the business will focus intensely on the effect of the nonqualified plan on the bottom line. The accounting effects of the plan and the life insurance funding vehicle as well as SEC issues and reporting requirements are all important to the business. Medium Closely Held C Corps. A C corp with a minimum of 50 to 100 employees, with 5 to 10 managers, strong cash flows, and a business succession plan in place is an ideal candidate for a nonqualified plan especially a supplemental executive retirement plan (SERP) with a cost recovery feature. Small Closely Held C Corps. Is the business dependent on one or just a few majority shareholders? Does it lack succession planning? Is cash flow inconsistent from year to year? A business that fits this scenario may be a better candidate for an executive bonus plan or a split dollar arrangement. In cases where the business lacks a tax advantaged qualified plan, you might want to explore this opportunity first. A better opportunity with this client might be building and funding a business succession plan. Once this foundation is in place, a nonqualified plan might be more suitable. Sole Shareholder or Controlling Shareholder C Corps. A sole shareholder with high personal CAUTION: THE FOLLOWING ENTRIES MAY PRESENT SOME ISSUES. expenses and little after-tax income may turn to the corporation to fund retirement needs, especially if the business is in a lower income tax bracket. The problem is that the IRS has raised the argument that where the shareholder is in the position to control the plan, there is no real deferral. A nonqualified plan involving a controlling shareholder may be able to withstand IRS scrutiny if it is carefully designed to ensure the existence of "objectivity" through the use of a separate executive compensation committee that excludes the controlling shareholder; takes care to provide similar benefits for all top executives; uses an independent third-party administrator, etc. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 5
Personal Service Corporations (PSC). If the C corp is classified as a PSC, any corporate income will be taxed at a flat rate the top federal corporate rate of 35%. When a nonqualified plan is put in place, if the taxable income reported by the PSC increases, this could result in additional taxes paid at the entity level. Where the shareholder/owner is in a lower individual income tax bracket, this may not be tax efficient. Governmental and Tax-Exempt Entities. Nonqualified plans for executives of governmental or taxexempt organizations are subject to a unique set of rules that are significantly more restrictive than those applied to taxable entities. Only approach this market if you have familiarized yourself with the requirements of IRC 457. Pass-through Entities. No matter what form of pass-through entity is used (sole proprietorships, S corporations, partnerships or limited liability companies), the general principle of taxation is that the owners, rather than the entity, are taxed on the income of the business. Consequently these entities do not provide tax leverage for the business owners. Although nonqualified plans can be implemented for non-owner executives of flow-through entities, it is important to remember that the money not spent on deductible employee salaries will flow through and increase income taxed to the owners. Not only is there a plan effect, but when an informal funding vehicle is used to offset the liability, there may be additional earnings (dividends, interest, capital gains, etc.) that will be taxed to the owners. If life insurance is chosen to track the liability, the owners will be also be taxed on their pro rata share of the nondeductible premium expense. This makes such plans quite expensive for the owners because they must personally pay tax currently on behalf of all the covered employees. It s important that they understand this tax effect before they get the tax bill at the end of the year. Independent Contractors/Directors. Nothing prevents an employer from covering an independent contractor under a nonqualified plan. However, it is important to evaluate carefully whether an employer-employee relationship exists or if there is true independence. One important tax difference is that independent contractors are subject to self-employment tax. Also, for FICA tax purposes, independent contractors, since they are not employees, fail to qualify for the special timing rule and are taxed under the general timing rule (i.e., nonqualified benefits are subject to tax when actually or constructively received). FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 6
Sales Scenarios Nonqualified plans provide flexibility in design. The following are some of the major opportunities for nonqualified plans: To Recruit, Retain and Reward. Capable and proven executives are in high demand. To compete for these executives, businesses must offer attractive total compensation packages. To win in the executive recruitment game, a business needs to offer something more that the basic core benefits offered by its competitors. A nonqualified plan that can be customized to meet the needs of an individual candidate is the perfect tool. The prospect of losing customized benefits may be cause enough for executives to ignore overtures by competitors. For Tax Deferral Maximization. A nonqualified deferred compensation plan allows a highly compensated executive to reduce current income tax by placing pre-tax deferrals directly into the plan. Since the deferrals and any earnings are not taxable until distribution, the executive has the advantage of tax-deferred compounded growth. Often employer dollars are added to the plan through matching formulas or performance incentives to further maximize deferral and enhance participation. To Eliminate Reverse Discrimination. Highly paid executives have grown accustomed to a comfortable lifestyle something they want to carry into retirement. Of course, this requires a certain level of retirement income. Unfortunately, broad-based qualified plans and Social Security are designed to benefit the average worker. Numerous limits on benefits and contributions means executives must look to supplemental retirement vehicles in order to meet their future needs. As a Qualified Plan Substitute. Where the terms (age, length of service, entrance date, etc.) of the qualified plan prevent an employee from participating in a qualified plan, a nonqualified plan can be used as a substitute. To Encourage Employment Change. Employers face another unique challenge when recruiting executives. Experienced executives often have built up sizable benefit packages and stand to lose a significant portion of the projected retirement benefit should they leave their current employer. In order to recruit these executives, prospective employers must make up most, if not all, of the benefits lost when executives change employers. This is one of the key reasons for the popularity of supplemental executive retirement plans (SERPs). FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 7
As an Early Retirement Incentive. Few businesses can afford to retain executives who have lost their competitive edge. Employers would like to see these executives take early retirement and allow the next generation of leaders to step up to the plate. The executives themselves may wish the same thing but are trapped by benefit plans that have failed to perform or formulas that require additional work years for them to comfortably retire. The logical solution is a supplemental retirement plan to make up for any shortage. As a Competition Inhibitor. Many businesses face the risk that a successful executive may leave and use his creativity and business acumen in a competitive start-up operation. Employers can t afford to indirectly finance their competition. Nonqualified plans structured to tie executives to significant future benefits may be the solution. As a Component of a Buy-Sell Agreement. Through the use of a nonqualified plan, a business can convert a portion of the purchase price of the business into tax-deductible compensation rather than having nondeductible acquisition cost. Also, a nonqualified plan can be used to bridge the transition to the new owners by tying previous owners or management to the business with a consulting contract. To Recruit Executives for the Board of Directors. Just as with executives, nonqualified plans can be used to recruit, retain, and reward outside directors. Many directors who are highly paid executives for another corporation prefer deferred compensation arrangements because they have substantial sources of current income. Nonqualified plans can also be used to create golden handcuffs, binding retiring executives to service on a company s board of directors. To Reward Independent Contractors. Since qualified plans can only cover employees and their beneficiaries, nonqualified plans can be a valuable tool for rewarding independent contractors who have strong ties to the business. Look for talented individuals who are project coordinators such as construction superintendents, computer consultants, etc. Nonqualified plans can be tied to project timing to reward leaders who successfully complete their projects by critical response dates. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 8
Corporate-Owned Life Insurance (COLI) Promised benefits create future liabilities for the employer. While a business adopting a nonqualified plan is not required to establish a funding vehicle, it will want to plan a strategy for meeting its future obligations. Various tax advantages made corporate-owned life insurance (where the executive is the insured and the business is the owner) an extremely attractive option for informally funding a nonqualified plan. When an employer buys life insurance instead of an investment, money can grow on a tax-deferred basis inside the life policy rather than be currently taxed as investment earnings. Furthermore, when structured properly, policy cash values can be accessed by the business to pay benefits as they come due without triggering taxable gain (current benefit funding). 2 Or, if cash flow is sufficient to pay benefit costs as they come due, the business can choose to recover the cost of the plan at the executive s death using incometax-free policy proceeds (death benefit funding). 3 There are a number of different approaches to determining the amount of life insurance needed. Current Benefit Funding. Under this approach, the business pays the benefits as they come due by using the cash values of the policy. This approach is often seen in small closely held corporations where current cash flow is limited and a long-term financing technique is not an option. As a financial asset owned by the business, not only is the cash rich insurance policy reflected on the balance sheet, but, as a general asset of the business, it can be accessed to pay benefits or other cash flow needs as they arise. Even with a current benefit funding scenario, death benefits can be structured so that the business is reimbursed for the additional costs associated with the nonqualified plan. Death Benefit Funding. Using this approach, which is similar to a current benefit funding approach, the business purchases a policy on the life of each plan participant. When the executive retires or otherwise meets the terms of the contractual agreement, the business pays benefits from current cash flow. The policy is then held by the business until the eventual death of the executive. At that time, the company receives a tax-free death benefit, designed to fully recover most or all of the costs associated with the plan. Generally, covered costs include; the after-tax costs of the benefits paid, the insurance premiums spent on the policies, plus a cost-of-money factor. 2 Withdrawals made during the first 15 years could result in unfavorable taxation under the recapture rules in I.R.C. 7702(f)(7). Withdrawals in excess of the cost basis may be taxable. Lapsing a policy with an outstanding loan results in the loan and any accrued interest being treated as a distribution that may be taxable. Modified endowment contracts (MECs) are taxed differently and are not suitable for nonqualified plan financing if withdrawals or loans are anticipated. Certain changes to a non-mec policy can result in the policy becoming a MEC. Withdrawals and loans will cause a reduction in death benefits and policy values, and may have tax consequences. A reduction in death benefit may cause the policy to become a Modified Endowment Contract (MEC). Distributions, including loans, from MECs receive less favorable tax treatment than policies that are not classified as MECs. This also applies to distributions made within 2 years prior to the policy becoming a MEC. Clients should consult their tax advisor. 3 If the business is a C corporation, the annual increases in the policy s cash value and any death benefits received in excess of the cash value may result in the Alternative Minimum Tax (AMT). However, corporate AMT for small corporations has effectively been repealed. Small corporations are defined as having average gross receipts of no more than $7.5 ml ($5 ml for initial qualification) for the three previous tax years ending before the year in question. In addition, where the requirement of IRC 101 (j) has not been met, the death proceeds in excess of premium payments are subject to income tax. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 9
For larger companies that have sufficient cash flow to allow them to use this long-term financing technique, the payment of relatively small premiums spent to acquire income-tax-free death benefits can be quite attractive. This concept does not take into account the time value of money. Product Choices. The choice of a life insurance product to finance a nonqualified plan is driven by plan design and the needs and circumstances of the business. Using life insurance as a financing tool for a nonqualified plan liability takes on a very different perspective depending on whether it is under the scrutiny of the financial officer of a large publicly held corporation or the owner of a closely held family business. In recent years, heavy emphasis has been placed on variable life products that allow the business to select the investment options for the policy cash value. Often employers select equity type investments to potentially maximize the total return on the policy or to participate in the stock market to a degree (without taking into account costs, charges, and fees associated with the life insurance policy). Obviously, where a current benefit funding approach is used, cash value performance is a priority; similarly where a death benefit funding approach is used, the emphasis shifts to guarantees and death benefit returns. Today, insurance companies compete to offer products that are specifically designed to meet the needs of benefit providers specializing in the COLI and/or BOLI (bank owned life insurance) market. These products are designed to achieve high early cash values where the premium expense is totally offset by the gain in the cash value, so that there is little accounting effect from choosing life insurance as a financing tool even in the early years of the policy contract. The lack of an accounting impact on the net profits of publicly traded companies is often necessary when dealing in this market. Financial officers seek products that offer high early cash values combined with policy persistency and wide ranges of investment options, and they want to deal with dedicated teams of insurance professionals experienced in this market. While public companies may be focused on the hit to the books, many small closely held companies place less emphasis on early cash returns. Often, due to their limited resources, they are seeking guarantees and assurance that the product will perform to meet future liability needs. In addition, lacking internal staff, they need help implementing and administering the plan. Notice and Consent Requirements for Employer-Owned Contracts under IRC 101(j). The taxfavored benefits that make life insurance an attractive option for informally funding nonqualified plans FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 10
are only available where the business has an insurable interest in the person insured. Corporations have, for many years, purchased life insurance on the lives of their key employees in order to protect the business against economic losses that would occur as a result of the untimely death of a key employee. It is widely accepted that corporations have an insurable interest in these employees. However, some corporations began broadening the scope of their plans to include most or all of their full-time employees (i.e., rank-and-file employees who clearly were not vital to the financial health of the business). Broad based COLI programs have resulted in litigation over the insurable interest of the employer as well as a great deal of unfavorable press for the insurance industry. The problems did not go unnoticed, and that led to additional regulations. In general, for employerowned contracts issued after August 17, 2006, Section 101(j) of the Internal Revenue Code generally provides that death proceeds will be subject to income tax. However, death proceeds may be received income tax free where specific employee notice and consent requirements are met, and certain safe harbor exceptions apply. This has made employee notification and consent an industry standard. Because the life insurance used to informally fund a nonqualified deferred compensation plan will usually be considered an employer-owned contract, even when it s owned by a Rabbi Trust, it is critical that, prior to policy issue, the business comply with the specific written requirements for employee notice and consent. In addition, at the time of policy issue, the employee must fall within one of the safe harbor exceptions such as being a director, highly compensated employee, 4 or highly compensated individual. 5 Documentation of compliance does not need to be submitted to Prudential, but the business owner should retain proof that he or she met both the notice and consent requirement and the requirement that the employee falls within one of the safe harbor exceptions for as long as the policy is retained as an employer-owned contract. To assist the business owner, Prudential has developed a sample Acknowledgement and Consent to Employer-Owned Life Insurance document found in IFS-A124057 Employer-Owed Life Insurance Rules Have Changed. 4 Highly compensated employees include employees who, during the preceding year, were 5% or more owners of the business or had compensation in excess of a specific amount during the preceding year ($100,000 if the preceding year is 2006 or 2007, indexed for inflation in future years). 5 Highly compensated individuals include the five highest-paid officers or individuals who are among the highest paid 35% of all employees. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 11
Nonqualified Plan Administration Similar to the qualified benefit arena, the continuing trend with nonqualified plans is that an increasing number of companies are outsourcing their nonqualified benefit plan administration to specialized independent third-party administrators (TPAs). The decision to outsource the administration is typically based on economics and time and resource issues. The services provided by a TPA may be limited to administrative tasks or may encompass all aspects of communicating, implementing, and maintaining the plan. It is important to identify clearly what the TPA will or won t do, if they do it well, and the cost to the client. The following list of things to consider is designed to help you evaluate potential candidates when prospecting for a suitable TPA: General Information How long has the TPA been in business? How large is the staff and what are its functions? Will certain staff members be assigned to your account? Is the firm s primary focus qualified plans or nonqualified plans? How many clients and/or plans does the firm administer? What is the average size of plan that the firm administers? Does the TPA have a list of their clients in the same industry with similar plans? Database System Was software purchased or self-created? Are programmers available to maintain the software? Can the system be customized? Are backup systems in place? Does the system have the flexibility to adjust to vesting schedules, investment choices, distributions, etc? Do clients have access to reports on the Internet or hard copy reports only? Do participants have access to account balances via The Internet and/or voice access? How frequently are account balances updated? FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 12
What are the systems and timing for transferring data from the client to The TPA? In addition: Request sample reports and a demonstration of the administration system. Test the access to participant accounts for user friendliness. Fee Quotes Should be in writing Detail exactly what services are covered. Clearly detail one time charges, per participant costs, system customization charges, minimum charges per plan, change charges, enrollment costs, and any costs outside the scope of normal services. Realizing the need for this expertise, Prudential Financial has identified professionals who specialize in the administration of nonqualified plans. To find out more about these service providers contact Advanced Marketing. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 13
Resources For Nonqualified Plans Using Life Insurance The following materials have been created by Prudential Financial to help you recognize, implement and close the sale. Producer Marketing Tools Seminars and Training Material Advice on identifying potential clients and closing the sale: IFS 73189 Producer Marketing Guide: Nonqualified Deferred Compensation Plans IFS 68111 Producer Training Seminar: Nonqualified Deferred Compensation Plans & COLI IFS 72523 CE Credit Seminar: Nonqualified Compensation Plans: Overview of Tax & ERISA Rules IFS 99485 CE Credit Seminar: Nonqualified Deferred Compensation Plans: IRC 409A Understanding the New Rules IFS 36373 CE Credit Seminar: Stock Option Plans IFS 75643 CE Credit Seminar: Equity Incentive Plans IFS 113751 PruPower Minute Level I: Nonqualified Deferred Compensation Using Life Insurance IFS 123870 PruPower Minute Level I: Employer-Owned Life Insurance IFS 88143 Chart: Business Insurance at a Glance* IFS 72760 Chart: Nonqualified Plans: Entity Considerations* IFS 72455 Chart: NQDC Plans: Entity Tax Implications* IFS 24767 Chart: Comparison of Business Entities* IFS 66100 Chart: Nonqualified Executive Benefits Arrangements* IFS 72454 Chart: Comparison of Qualified and Nonqualified Plans* IFS 85299 Chart: Comparison of Plans Available for Tax-Exempt Organizations* IFS 110425 Chart: Individual Equity Compensation Plans * Also approved for use with consumers and advisors. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 14
Sales Scenarios Examples of sales situations featuring nonqualified plans using life insurance: IFS 71582 Nonqualified Compensation Plans Avoid Contribution Limitations of Qualified Plans IFS 72544 SERPs Provide Supplemental Income Without Employee Contributions IFS 63535 (Split SERP) Combination Endorsement Split Dollar & SERP Arrangements IFS 98797 Three Needs One Policy: Key Person, Split Dollar & Deferred Compensation Fact Finders and Questionnaires Used to identify the client s need and to help select the appropriate nonqualified plan: IFS 72580 Profile Questionnaire: Nonqualified Deferral Arrangements IFS 69748 Fact Finder: Confidential Business IFS 89472 Fact Finder: Executive Benefits Supplement IFS 79160 Plan Design Questionnaire: Deferred Compensation & SERP Material for Use with Clients Client Approach Letters IFS 69598 Executive Benefits Consumer Letter IFS 71496 Business Planning Postcard IFS 15760 General Business Planning Prospecting Letter & Reply IFS 69845 Business Planning Consumer Seminar Invitation Client Brochures IFS 6833 Business Insurance Strategies IFS 15713 Executive Compensation Plans IFS 51231 Nonqualified Deferred Compensation: Retain Your Most Valuable Business Assets IFS 85948 Section 457 Deferred Compensation Plans for Employees of Governmental & Tax-Exempt Organizations IFS 124057 Employer-Owned Life Insurance Rules Have Changed FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 15
Client Presentations Short concept overviews using diagrams and bullet points. IFS 73472 Nonqualified Deferred Compensation Plan IFS 72623 Supplemental Executive Retirement Plan (SERP) IFS 73228 Death Benefit Only (DBO) Plan IFS 72625 Nonqualified Deferred Compensation Secured with a Rabbi Trust IFS 61876 Three Needs One Policy (Key Person, Split Dollar & Deferred Compensation Arrangements) IFS 72624 (Split SERP) Split Dollar & Deferred Compensation Arrangements IFS 83573 Eligible Section 457(b) Plans for Governmental Organizations IFS 89382 Eligible Section 457(b) Plans for Tax-Exempt Nongovernmental Organizations IFS 72763 Ineligible Section 457(f) Plans for Tax-Exempt Organizations and Municipalities Client PowerPoint IFS 63057 Nonqualified Deferred Compensation Plans: Additional Retirement Income & Family Security Benefits for Selected Employees Technical Resources These are short analyses of technical issues for licensed financial professionals and clients advisors. IFS 97277 Legislative Update 2004: IRC 409A Nonqualified Deferral Plans Legislation IFS 127834 Tax Update 2006: Notice 2006-100: Additional Guidance on Reporting and Withholding Requirements for NQDC IFS 130564 Tax Update: IRC 409A: Rules Affecting Nonqualified Plans IFS 132650 Final Regulation for IRC 409A and Topical Index IFS 21954 Deferred Compensation Technical Guide IFS 133464 Tax Update 2007: Notice 2007-34 Application of IRC 409A to Split Dollar Arrangements FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 16
Frequently Asked Questions IFS 72529 What is an "Unfunded" Nonqualified Plan? IFS 75574 Why Use Life Insurance to Informally Fund NQDC Plans? IFS 89036 Life Insurance and Corporate Alternative Minimum Tax (AMT) IFS 65832 NADC Protection Provided by a Rabbi Trust IFS 66089 ERISA Reporting Requirements & NQDC Plans IFS 72581 ERISA Requirements: The "Top Hat" Exemption IFS 72448 Accounting for Nonqualified Plans Using Life Insurance IFS 75021 Nonqualified Plans: Should You Consider a Third-Party Administrator? IFS 89039 NQDC Plans and Death Benefit Taxation IFS 66909 NQDC Plans and Social Security Taxes IFS 89049 The Impact of NQDC on Social Security Benefits IFS 77346 NQDC Plans in an S Corporation IFS 99168 Bank-Owned Life Insurance (BOLI) and Regulatory Guidance IFS 98261 New Deferred Compensation Rules: Action Required This material is provided courtesy of The Prudential Insurance Company of America for its licensed financial professionals. Variable life insurance is offered by Pruco Securities, LLC. Each of the foregoing is a Prudential Financial company. It contains references to concepts that have legal, accounting or tax implications. It is not intended to be legal, accounting or tax advice. Your clients should consult their own attorney and/or tax advisor for advice regarding their particular situation. 2007 The Prudential Insurance Company of America 751 Broad Street, Newark, NJ 07102-3777 ALL RIGHTS RESERVED. www.prudential.com IFS -A073189 Ed. 07/07 Exp. 07/09 FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. FOR INTERNAL USE ONLY. NOT FOR USE WITH THE PUBLIC. 17