JProehl Posted January 11 Report Share Posted January 11 I am have been tasked with setting up a NQDC plan for a few key executives at our small company and it has my head spinning a bit. Basically the owners of the company want to set aside an annual discretionary amount for a few key employees. The contribution would be tied to employee and company performance. The amount is intended to be a SERP (no employee deferrals) and become available after the employee retires. Most of the target employees are 10-15 years away from retirement. We are looking at the standard clauses providing for acceleration in the event of death, disability, change in control. Also provision regarding non payment for termination for cause or going to work for a competitor. I will admit I am getting somewhat confused regarding the difference between vesting and triggering event. I have talked with a couple of folks who state that it is normal for employees to vest over a 5-10 year period. For example can 50 year old employee have a 5 year vesting schedule at 20% per year but the plan specify that payment is not made until they reach normal retirment age? My lack of clarity of over the vesting / triggering question leads me down the path of the what is the correct reporting and payment regarding payroll / FICA. I have some done some research and want to make sure we handle any issues regarding the special timing rule for FICA correctly. What the owners have in mind is to make these annual discretionary contributions, perhaps tie a return rate on the contributions to the S&P500, and pay the employee out either in a lump sum or in 3 years after retirement. The funds would be available at the later of age 65 or a separation from service (some employees may work until 67). What I think I know so far: - This would be a defined contribution SERP plan. - It would be a non account balance plan. - Distributions from the plan should be reported on a W2 and are subject to income tax when paid - If FICA is not paid according to the special timing rule, then FICA would would also be owed at the time of distribution under the general timing rule. FICA would be paid by both the employee and employer. What I am confused about and seeking guidance - The difference between vesting and triggering - When would the FICA tax be due? Does the special timing rule apply? - If the special timing rule applies, how is the amount determined? - What am I not thinking about that I should be? Link to comment Share on other sites More sharing options...
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