General NQDC Plan Administration Questions

[Guest ramassa]

I have some general administrative questions about NQDC Plans, since I have never actually seen one accounted for on a recordkeeping system:

1. Can anyone give me an example of how a NQDC Account Title should appear on a recordkeeping system(e.g. ABC Trust Co., TTEE for the XYZ company NQDC Plan)?

2. Can an NQDC account be labelled as "for the benefit of" ("FBO") a particular participant without actually considering the account as funded for that participant? It would seem to me that, as long as the Trustee retains control over the account for the purposes of paying corporate creditors, then this would be acceptable. Please comment.

3. As far as I can see, because the nature of the underlying investments are at the ultimate discretion of the trustee, these accounts could be maintained on almost any type of financial recordkeeping system (e.g. retail brokerage account, retail mutual fund, retirement plan r/k like Trustmark, etc.) It seems the only limitation exists with service provider and their access to investments that the trustee might want. Any necessary internal reporting could be assembled by a CPA, in theory. Any comments?

4. Can the plan be Trusteed by person or entity other than a benefitting employee? Are there any restrictions as to who may be the trustee?

Thanks

[pjkoehler]

Most of your questions reflect "form-over-substance" concerns that don't impact the tax and ERISA treatment of the plan. Take a look at Rev. Proc. 92-64 and 92-65. If the firm can live within the constraints of the model rabbi trust and the guidance regarding trusts section, then you're probably better of conforming to it.

[Guest EAKarno]

To begin with, you shouldnt even be considering establishing a rabbi trust without the services of a corporate financial institution that has a great deal of experience acting as a rabbi trustee.

Your concerns in points 1, 2, and 4 are really just semantic in nature and as previously noted Phil, probably not going to have much tax or ERISA effect. Again, however, I think it would be best to leave these matters of administrivia to the bank.

Point 3 raises an interesting point about software tracking systems. If the plan requires all deferrals to be deferred until retirement or termination of employment, and then paid out under a single plan of distribution, then any 401(k) system will work. If, however, your plan allows different deferrals to be deferred for different periods of time and/or paid out over different periods of time, then you will need a system specially designed for an NQDC Plan. As NQDC specialists, our firm uses a proprietary version of Trustmark that has been specially designed to handle such arrangements. Your regular 401(k) recordkeeper cannot handle such a plan.

Eric A. Karno, JD

Balser Financial Corporation

404.504.3864

eric.karno@balser.com

[Guest LRichey]

There are ERISA issues in administrative communication materials and Internet screens seen regularly by plan participants not generally recognized or discussed. The "for the benefit of" language" is probably not a good idea since it suggests qualified plan segregated accounts. Special disclaimers may be in order as well, especially if 401k recordkeeping is used.

I have an article that addresses this area if you would like to see it.