Designing a Plan

Designing a Nonqualified Deferral Plan can be as simple or as complex as you wish to make it. This area is intended to outline and explain some of the options available. Although no two plans are exactly the same, they all share a similar framework and usually include the following provisions:

  • The deferral election determines the amount of compensation to be withheld from the participant's pay check. It could be defined as a:
    • Flat dollar amount
    • Percent
    • Combination of the above

  • The deferral commitment duration is the period during which compensation is withheld. Different options to consider might be:
    • One year (participants re-enroll annually)
    • Evergreen (the commitment continues until stopped or changed during an enrollment period)
    • Multiple year units predetermined by the plan (usually associated with underlying funding assumptions)

  • An associated investment such as:
    • Interest rate (may be a stated percentage or follow an index)
    • Security based options (could be the same or different than the 401(k) selections)
    • Company stock 
    • Combination of the above

  • Sometimes an employer contribution in the form of:
    • Match (percentage formula similar to 401(k))
    • Discretionary contribution (a percentage or flat amount - may be used to supplement limits on qualified plan benefits)

    Each of the employer contributions may:

  • Distribution options define the form and timing of a payout. Payouts may occur at one or more of the following events:
    • Retirement
    • Termination
    • Death 
    • Scheduled in-service (pre-retirement) 
    • Hardship 
    • Plan termination

  • Informal funding and benefit security(Rabbi Trusts and Secular Trusts). You may or may not wish to informally fund or provide security for the benefits in your plan. Options for each of these provisions are explained in their respective areas of Deferral.com.

Your specific plan design will depend on a number of factors based on your corporate culture and goals, your informal funding choice, and your decision to support the ongoing administration in-house or outsource it to a third party administrator.

Deferral.com provides you with the most flexible, user friendly plan administration and participant service features available online. To learn more, please view our automated demos or contact us at info@deferral.com.

The information contained on this Site is general in nature and should not be considered legal, tax or investment advice. This information is provided for general educational purposes in connection with your use of our technology site. The facts of your particular situation, and developments in applicable laws, rules and regulations or the interpretation thereof, may affect the information as it pertains to you. You should consult with your attorney or tax advisor regarding your specific legal or tax situation and with your investment advisor regarding the risks and advisability of sponsoring or participating in a nonqualified plan.


Back to Top


Copyright 1999 - 2021. Deferral.com.   All rights reserved.

Privacy Statement | Terms & Conditions