Companies in a variety of industries such as construction, auto dealerships, or manufacturing, for example, are finding that retaining and motivating key employees is essential for the company to remain both stable and competitive. In some cases, although the employees are key to the organization, they do not meet the top hat definition of, “a select group of management or highly compensated (workers).”
When this is the case, a nonqualified deferred compensation plan (NQDC) is not a viable option for retaining and rewarding these employees. In such situations, alternate plan designs can be utilized.
A full-service logistics company with 150 employees considered its workers as part of evaluating its value proposition. Among the employees, a group of twelve workers were identified as key to business operations. The company sought a way to better retain these valued workers. Within the group of twelve, three employees were highly compensated, but the remainder were not, which limited plan design choices.
Using a Nonqualified Incentive Bonus Plan, the company was able to motivate and reward the select group with contributions based on revenue metrics and to retain them with a vesting schedule. Other features that added value to the plan were:
- Tax deferred growth of account balances
- Investment options for account balances (unlike most incentive plans)
- Plan balances distributed within a maximum of ten years for every annual bonus (versus at retirement)
Companies of all sizes can use a Nonqualified Incentive Bonus Plan to retain employees that are key to generating productivity and revenue. Depending upon client demographics, either a NQDC plan, a Nonqualified Incentive Bonus Plan, or the use of both types of plans, may be helpful for meeting corporate objectives and rewarding and retaining valued employees.
Download this case study summary, Retaining Employees that are Key but Not Highly Compensated as a PDF.
About Fulcrum Partners Managing Director, Kristine Kopsiaftis Lampert:
Managing Director Kristine Kopsiaftis Lampert consults with public and private entities to provide a full range of services with respect to the design and management of the suite of executive benefits programs, including deferred compensation, after tax plans, and executive life and disability programs. Inspired by her knowledge, diligence, and her skill in hearing both what clients say and fail to say, organizations engage Kristine to provide creative, performance-driven strategies for attracting, retaining, and rewarding highly compensated executives