An executive top-hat plan can be a great way to attract and retain highly qualified executives or supplement a business owner’s compensation, but the plans have a big downside. Because the plans are generally unfunded, major events at the sponsor, like a sale or insolvency, can decimate a plan and leave participants empty handed. The effect on a top-hat plan when a sponsor liquidates its assets is illustrated by a recent Seventh Circuit Court of Appeals case. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of deferred compensation plans in Advisor’s Journal, see Tax Court Calculates FMV of Policies Distributed from Terminated 419 Plan (CC 11-35) & Tax Courts Holds Employee Taxable for Value of Life Insurance Owned by Welfare-Benefit Plan (CC 11-14).
For in-depth analysis of nonqualified deferred compensation plans, see Advisor’s Main Library: Non-Qualified Plans, Split-Dollar.