non-qualified defined benefit plan

[abanky]

Is my understanding of this correct?

No tax advantage, no 401/410 testing... it has to be in writing...

Basically its a promise to an employee or group of employees that upon their termination they will get x amount of dollars.

Anything else?

[Effen]

I think there is more to it than that. Rules are much tighter now than before. Documents need to be specific, especially regarding lump sums and eligibility. There are also rules related to when the distuributions must be received.

Sometimes they are funded with a trust, sometimes with insurance, sometimes not at all.

They need to be recognized for FASB purposes

I am certianly not an expert, but I know their impact shouldn't be underestimated. Probably best to find an attorney who works with them to get an idea what is involved.

[XTitan]

It's a little bit more than that. See IRC 409A and the 397 pages of regulations under that.

[david rigby]

Probably best to find an attorney who works with them to get an idea what is involved.

And an actuary who is familiar with FAS 87/158.

[Guest Spock]

Speaking of non-qualified plans, our plan contains a provision (likely right out of 409A) that says we are to withhold for 6-months any distributions due to a Key Employee, "as determined in accordance with 416(i). 416(i) talks about 5% and 1% owners. If the officer owns less than 1% of the outstanding stock, does that mean the 6-month delay does not apply to that person?

[SoCalActuary]

'(i) Definitions

For purposes of this section -

(1) Key employee

(A) In general

The term ''key employee'' means an employee who, at any time

during the plan year, is -

(i) an officer of the employer having an annual

compensation greater than $130,000,'

I presume your CEO fits this definition.

You can be a key employee without ownership.

[XTitan]

For completeness, the comp limit is indexed and is currently 160,000.