The Solution to the Retirement Income Gap

The Solution to the Retirement Income Gap


Consider NQDC to Build Value and Reward Your Best Talent

There’s growing interest in designing and deploying innovative compensation benefits and non-qualified deferred compensation (NQDC) because of the value they bring both employer and employee.

It’s more important than ever to understand the positive impact NQDC can have on your business, your core leadership team, and your top performers by providing them with a mechanism to close the retirement income gap, thus securing for them a strong financial future that provides peace of mind.

Your reputation as an employer could also be bolstered as the job market views your company as one that offers retirement income security solutions as part of a total compensation plan, a plan that is personalized and adjusted to meet the needs of valued members of your management team.

While qualified plans like 401(k) remain a standard benefit offering, they have contribution limitations, whereby NQDC plans can be more flexible and creative for businesses of all sizes.

Customized NQDC plans are a powerful tool for select personnel to enhance their retirement savings.  They offer unparalleled flexibility in tailoring unique opportunities for tax-efficient wealth accumulation and talent retention.  NQDC bridges the gap between deferred and retirement income, offering unlimited pre-tax awards and deferrals, tax-deferred earnings, diverse investment options, and enhanced flexibility for retirement and life planning, empowering employees to retire without sacrificing lifestyle or risking outliving their income.


The Solution to Retirement Income Insecurity

2024 will be a record-breaking year for retirement in the US with an average 11,000 Americans per day expected to celebrate their 65th birthday through December.  Approximately 4.1 million Americans will turn 65 this year and every year through 2027.   Meanwhile, the average retirement age is being pushed out.  Executives are working and living longer.  How can we close the retirement income gap? There is no question that many Americans wonder if they will have enough savings to ever retire comfortably. 

However, there are limits to how much income can be contributed to qualified 401(k) plans and individual retirement accounts (IRAs).  Also, qualified plans can be subject to coverage limitations and non-discrimination testing.


NQDC plans can fill the gap. Governed by the Internal Revenue Code 409A, these flexible solutions provide opportunities for tax-efficient wealth accumulation for your executives that will also support talent retention for your business.

According to Vanguard, millions of Americans face a retirement income shortfall.  The solution: consider NQDC.

An NQDC plan can maximize benefits by providing the following flexibility:

  • deferred income and compensation without the limitations associated with qualified plans, like traditional 401(k)s
  • additional savings and employer contributions when qualified contributions are maxed out
  • customized tax-deferred income
  • tax-deferred retirement savings
  • benefits in lieu of equity-based compensation

There are three primary reasons why companies invest in these plans for participants.  Because 60% of employees are saving for retirement; 22% want to reduce current taxable income; and 12% are missing out on additional employer contributions.


The Solution to Attracting and Retaining the Best

NQDC plans offer employers the flexibility to attract and retain the best talent and highly compensated employees, while customizing payment schedules based on specific performance metrics.  Recruiting and hiring is time consuming and expensive. Replacing your most valued leaders and top performers is even more costly. The expense of turnovers can range from:

  • 30%-50% for entry-level staff
  • 150+% for mid-level employees
  • roughly 400% for highly specialized personnel


NQDC plans can help support succession planning objectives by reducing turnover, creating worker loyalty, ensuring employee performance and providing a team of future leaders.

And most importantly for you, the employer, these plans can provide options like company-owned life insurance (COLI) that provide revenue streams that can offset the cost of benefits.

Employers can align employee benefits and incentives with company goals and financial objectives in an NQDC plan to reward and retain loyal employees.  NQDC plans:

  • aren’t restricted by IRS contribution and non-discrimination guidelines
  • can be designed to address specific business and employee performance goals
  • can support succession planning objectives


Is an NQDC Arrangement Right for You?

Strategic applications for NQDC plans include:

  • providing deferred compensation benefits for executives without the cost constraints of a qualified arrangement that covers many non-executives
  • offering additional deferred compensation benefits to executives maxing out contributions under qualified retirement plans
  • providing tax-deferred compensation to key employees under different terms other than staff
  • benefits key employees seeking a tax-efficient, automatic program that leverages tax savings for future benefits
  • enables closely held companies to attract and retain non-owner employees when equity-based compensation, like stock, can’t be offered


A Qualified NQDC Advisor

NQDC plans are managed by an expert advisor and designed to meet your organization’s financial and retention objectives, creating opportunities to attract and retain top-notch leadership for the future. Your valued Advisor will:

  • align the plan with key business and participant objectives
  • optimize benefits
  • continuously monitor market changes
  • integrate NQDC plans with larger retirement benefit structures
  • analyze existing plans and update plan documents
  • maintain product and carrier neutrality


At Newcleus, we focus on crafting custom-designed, cost efficient NQDC plans that maximize benefits for both employee and employer.  Always available and always flexible, we are here to guide you from end-to-end.