There’s more to retirement plans than just 401K plans.

Sure, 401K plans are plentiful and well-known. But they don’t do everything you might want.

Like what? You ask?

Reward your Top Performers ONLY!!!

This is totally against what 401K plans do: provide to all employees equally and do not discriminate against other employees by benefiting high-wage earners or HPE, highly compensated employees. 401K plans certainly help bring about a positive company culture for everyone, but it’s whose chosen few you’d like to give special care to.

So, there are two primary plans available: the Deferred Compensation Plan and a Long Term Incentive plan.

A non-qualified deferred compensation plan is pretty much what it sounds like. The employee will have pay that they really don’t need to live off of and can, therefore, delay their payment. The delay is usually until retirement age. This usually results in lower taxes for the employee because their income tax rate should be lower when they retire. In addition, due to their high wages, these employees usually can’t put in the maximum 401K contribution due to those non-discrimination tests. This is a basic explanation; plenty of other attributes can be included.

Now for the non-qualified long-term incentive plan. Here, only certain employees are selected, and a formula is created to give these employees an “incentive” to stay with the company. The formula is made by the owner and advisor similar to a bonus, and the employee has to wait for a period of time, until they are vested in that amount. At that time, the incentive is paid out. This vesting time frame is up to the business owner and must be at least one year long. Again, this is a basic explanation; plenty of other attributes can be included.

As always, seek the advice of your financial professionals before implementing any method on your own.