section 1 - The American College Online Learning Center

. Durationc. Reliabilityd. Other6. Part-time workinformation about the plan. There may also be information about the planin the client’s employment contract.(2) When estimating benefit amounts, consider the same issues discussedwith qualified plans.(3) Nonqualified plans, like qualified plans, are designed to defer taxes untilbenefits are paid out. However, taxes cannot be deferred by rolling benefitsinto an IRA. In other words, taxes are due when benefits are paid.(1) Nonqualified plans are likely to offer salary continuation only for a statednumber of years. However, some nonqualified plans offer life annuities.(2) If nonqualified benefits are in payout status, benefits may or may notcontinue after the death of a participant depending upon the terms of theplan. In other words, there may not be a survivor benefit if the client withthe nonqualified plan pre-deceases his or her spouse.(3) If the participant dies while still employed, the nonqualified plan mayinclude either lump-sum payments or salary continuation to a beneficiaryfor a period of time.(1) Benefits in nonqualified plans are not as secure as with qualified plans.The participant is treated as a general creditor of the company, and ifthe company has financial problems it is possible that some or all of thebenefits will not be paid. As recent history has shown us, companies ofany size can fail.(2) Plans can have vesting provisions that require many years of servicebefore benefits will be paid. A plan can also include a do-not-competeclause or a post-retirement consulting clause, meaning that benefits willstop if these agreements are not complied with.(3) The plan can also require that in order to receive benefits, otherperformance goals have to be satisfied as well.(1) Unlike qualified plans, nonqualified plans may not allow any alternativeforms of distribution.(2) Even if they are available, elections must be made well in advance ofthe distribution of benefits.a. Part-time work may involve staying at the same job; doing some consulting, ortaking another part-time job. Part-time work can be an important part of the planfor income as well as for life satisfaction.b. Amount(1) Planning Point: Planners may find it difficult to estimate income frompart-time work, especially if the future employment is ill-defined.(2) Future part-time employment prospects seem clearer when the client hasa position lined up, or consulting clients already identified.(3) Consulting or other self-employment income may vary widely, and if theperson is new to consulting it may take a number of years to get situated.2.11