Short-Term Benefit Plans Can Bring In Top Talent
To help attract top talent to their organizations, business owners are being forced to consider offering benefit plans that short-term executives will have access to.
A Short Term Deferred Compensation (STDC) plan is a creative form of nonqualified deferred compensation in which benefits typically are “accrued” or “earned” over a relatively short period of employment.
As an alternative or supplement to salary or bonus increases, equity compensation awards, or long-term deferred compensation arrangements, the STDC plan can be designed to be selective, flexible and cost-effective.
In this article, I will review the fundamentals of STDC plans, discuss some important plan design and funding considerations, and will help you identify prospects for these creative benefit arrangements.
Fundamentals. STDC plans may be designed as either supplemental or deferral plans. Under a supplemental plan, executives are not required to “defer” any portion of their salary or bonus income in order to receive benefits under the plan.
For example, lets assume that ABC Company wishes to recruit an experienced executive to “turn around” one of its struggling divisions. In order to recruit this talented executive, the company will establish a STDC plan that will provide the executive with a series of deferred compensation payments that will begin after the assignment has been successfully completed.
In contrast, deferral plans require that executives defer a portion of their salary or bonus income. Deferral plans can be attractive benefit solutions when companies are unwilling to increase an executives current salary or bonus compensation, or when companies are unwilling to provide their executives with long-term deferred compensation benefits.