Terry Bork
Financial Solutions
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Solutions for Attracting, Retaining, and Rewarding Top Talent

Nonqualified Deferred Compensation

A popular method banks and other financial institutions use to attract, retain and reward top executive talent, is to provide a Nonqualified Deferred Compensation Plan.

Under the rules of the Employee Retirement Income Security Act (ERISA), qualified plans must be funded, and the benefits to highly compensated individuals are limited as they relate to rank and file employees.

ERISA provides special benefits for top hat employees.  These benefits may not be funded, and are subject to forfeiture.  These benefits may not be offered to any individual that is not considered management or highly compensated.

While benefits must be unfunded, assets may be set aside to finance the future liability.  Bank-Owned Life insurance (BOLI), is a widely accepted corporate asset that enables institutions to realize attractive yields, and finance Executive Compensation Plans.