executive employees and features of the nonqualified deferred compensation plans

 executive employees and features of the nonqualified deferred compensation plans

The topics mainly give an understanding of the executive employees as well as the features of the nonqualified deferred compensation plans. They also explain the examples of the NODC plans for the executives’ retirement, the mechanisms for funding the NGOC plans, and the separation agreement for the executives. The establishment of benefits and compensation for the executives calls for knowledge of more principles and practices (Copeland p.65). Under normal circumstances, they do not apply to nonexecutive employees. This issue of compensation for executives has recently drawn a lot of attention in the media since the compensation for the executives’ increases even as the company’s profits are declining. This paper will, therefore, discuss the key employees distinguishing between the executives and nonemployees based on their regulations and also the highly compensated employees. The main reason why they are paid higher is that they play a vital role in the management of the organization. Key employees also help in making better decisions for the success of the organization, and that is the reason they are considered to be essential in the company. As much as they play an indispensable role in the company and ensure better performance, the employer should offer retirement benefits for them as a way of appreciation when they retire.

The term key employee refers to any employee who receives annual pay of not less than $175,000 or a person who was the owner of 5% of the employer’s business and 1% of the employer’s enterprise with annual pay of not less than $150,000. All the employees in an organization are entitled to retirement benefits, and their position in the company determines the amount they should be given at the time of retirement. All the pays for the employees are taxed. According to the Fair Labor Standards Act of 1938, every employer should meet its provisions for all its employees (Butrica and Karamcheva, p.138).

The law states that it creates the right to a minimum wage and “time-and-a-half” overtime pay when people work over forty hours a week. The law also applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or the production of goods for commerce, unless the employer can claim an exemption from coverage. They include medical care, disability, and life insurance programs, as well as retirement programs for the employees in an organization. The limitations in the private sector pension system prompted the passing of this law since it undermines the employee’s retirement security(Copeland p.65). For instance, in ERISA, the employers would determine the time when the employees will start taking part in the retirement plans of the company. This may lead to a low amount of funds for the retirement benefit of those employees.

The employer can set a high minimum age of services for the employees to be able to take part in the plan since older employees will have lesser. ERISA is a very complex and far-reaching law. Several stakeholders, like the key employees and employer, and even the government, have understood the language of this law differently, and this led to several court rulings to assist in the interpretation (Copeland p.69). For instance, COBRA mandated that all former employees have the chance to continue with health care coverage for a given period through the payment of premiums. As well know, the executive employees in an organization play a very vital role in the success of the company and also setting up strategies that are so competitive (Butrica and Karamcheva p.141). The two main groups of employees recognized by the Internal Revenue Code are highly compensated employees and the key employees. It makes use of the term key employees in determining the importance of including the top-heavy provisions in the retirement plans that are qualified (Plan p.141). It also makes use of the term highly compensated employees for the rules of nondiscrimination in the benefits sponsored by the employer. Even though the two designations are created for the applications of federal tax rule, the workers in both groups are the ones who serve in the role of executive leadership and also take part in the executive benefits and compensation plans.

The IRC refers to a set of rules and regulations that pertain to taxation in the U.S.Tax is the primary source of revenue to run government operations and programs. The internal revenue service implements the internal Revenue Code, and it also levies penalties to the individuals and companies violating those set rules (Copeland p.75). The government has been encouraging employers to offer retirement benefits to their employees with tax deductions. In other words, the government has enabled employers to exclude the retirement plans payments from incomes to taxation. Therefore, the higher the contribution to the retirement plans, the higher the reduction in taxes owed to the federal government. The IRC has several rules for legally required and discriminatory benefits (Plan p.154). It offers incentives for employers who provide optional benefits as well as the employees as receivers of those benefits. Generally, employees can reduce tax liability by deducting the cost of some benefits from their total annual income. The employers, too, can deduct the cost of benefits from their total yearly income at the time when costs are ordinary and the necessary expenditures of the firm.