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Exam 11: Nonqualified Deferred Compensation Plans for Executives

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Question 21

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Define and provide main characteristics of one unfunded funding mechanism and one funded funding mechanism.(Funding Mechanisms)

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Question 22

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When considering funding mechanisms,employee-owned annuities offer the highest level of security.(Funding Mechanisms)

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Question 23

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Excess benefit plans generally have longer vesting periods than SERPs.(Contrasting Excess Benefit Plans and SERPs)

Explain the difference between a golden parachute and a platinum parachute.(Separation Agreements)

Briefly discuss the issue of mandatory retirement age with regard to nonqualified plans.(Mandatory Retirement Age)

This provides income to executives at the end of a designated period and executives never have to exercise their stock rights to receive income.(Stock Appreciation Rights)

The IRS limits the annual benefit amounts for a defined benefit plans to the lesser of $185,000 in 2017.(Defining Nonqualified Deferred Compensation Plans (NQDC))

According to the IRS,for nonqualified plans employers typically deduct expenses only when the employee receives income from the plan in the future.(Defining Nonqualified Deferred Compensation Plans (NQDC))

Disposition is the sale of stock by the stockholder.(Basic Terminology)

Stock grant refers to sale of stock by the stockholder.(Basic Terminology)

Trust funds and insurance contracts do not secure an employer's promise to make future payments.(Funding Status)

What was the IRS limit for annual earnings amount for determining qualified plan benefits in 2017? (Objectives of Nonqualified Plans)

These clauses in the employment agreement provide pay and benefits to executives after a termination that results from a change in ownership or corporate takeover.(Golden Parachutes)

Who are executives? Explain.(Defining Executive Employment Status)

Exercise of stock option refers to an employee's purchase of stock using stock options.(Basic Terminology)

Under SERP,nonexecutive employees earn an annual retirement benefit equal to 50% of the highest average annual salary for a consecutive three-year period.Defining Nonqualified Deferred Compensation Plans (NQDC))

Top hat plans are unfunded plans.(Supplemental Executive Retirement Plans (SERPs))

The IRS uses the term "key employees" for nondiscrimination rules in employer-sponsored health insurance plans.(Who are Executives?)

Which one of the following is not a characteristic of employee owned annuities? (Employee-Owned Annuities)

ERISA Title I exempts nonqualified plans from fiduciary responsibility.(Supplemental Executive Retirement Plans (SERPs))