Non-Qualified Plan & Benefits Financing Solutions

Essential competitive tools

Executive and Director Benefit, or non-qualified plans provide flexibility in developing benefit compensation strategies. These programs are used to expand the scope of a benefits package beyond a qualified retirement plan solution to help attract, retain and reward talent to position your organization competitively.

Executive and Director Benefit plans may be used to provide replacement income at retirement based on total (non-limited) compensation, reward, attract and retain key executives and directors, replace benefits lost due to IRS limits on qualified plans, provide benefits in addition to those under qualified plans, defer compensation and provide enhanced benefits in the event of an acquisition or other change of control.

We offer a broad array of plan designs and flexible design features.

Executive Incentive Retirement Plan (EIRP) / Director Incentive Retirement Plan (DIRP)

 

  • An annual deferred award will be made to participants if the organization exceeds certain pre-determined benchmarks on an annual basis. Examples of benchmarks are return on equity, return on assets and net income.
  • Interest is credited on each participant’s account (i.e. prime rate).
  • The accumulated account balance will be paid out to the participant upon retirement from the bank over a 5, 10 or 15-year period (with interest), or in a lump sum, at the discretion of each participant.
  • Amounts deferred are not taxable income to the participant or heirs until actually received.
  • Full pre-tax amounts that are deferred earn interest that is compounded without current taxation.
  • Each participant has an individual agreement that specifies:
    • Annual award criteria
    • Interest crediting
    • Payout duration
    • Death Benefits
    • Disability
    • Change of control protection
    • Vesting

Supplemental Executive Retirement Plan (SERP) / Director Retirement Plan (DRP)

  • An income benefit paid at retirement by the bank to the executive or director equal to a flat dollar amount or a percentage of final pay (i.e. 25% of final 3 year average salary).
  • The annual benefit payment is paid out over a 5, 10, or 15-year period or in a lump sum, at the discretion of each executive or director.
  • Each executive/director has an individual agreement with the bank that specifies:
    • Vesting
    • Death benefits
    • Payout duration
    • Disability
    • Change of control protection

Executive & Director Deferred Compensation Plan

  • Each executive has the ability to defer a percentage of his or her salary or a flat dollar amount annually. Directors can defer board meeting fees and retainer fees.
  • Interest that is credited on each executive & director’s deferral account is adjusted annually (i.e. prime rate), a crediting rate is typically designed with a floor and ceiling rate.
  • Each executive and director is 100% vested in his or her account balance.
  • The accumulated account balance will be paid out to the executive or director upon retirement from the bank over a 5, 10, or 15-year period (with interest), or in a lump sum, at the discretion of each participant.

Group Term Replacement Plan

  • The bank provides Group Term Life insurance through Bank Owned Life Insurance.
  • The benefit can mirror the Group Term plan or it can be enhanced (i.e. remove cap, provide post retirement).
  • The bank maintains the first $50,000 of coverage with the Group Term provider to deter adverse census rates by removing insureds from the pool.
  • Participant reports a reduced amount of annual reportable income due to less expensive one-year term rates utilized by insurance carriers than those used by Group Term providers that are based on IRS tables.
  • The bank will own the cash values of the individual, permanent BOLI policies, and show the earnings of the policies (cash value increases) on its financial statements.
  • The bank will be the beneficiary of the death benefits in excess of each executive’s multiple of salary.
  • The plan design will create significant net income for the bank, rather than the pure expense of the current group term premiums.