Meeting these requirements increases costs for sponsoring qualified plans.
Some family businesses find qualified plans to be too costly or too cumbersome to sponsor.
Others may sponsor such plans but also want to offer key employees and owners additional benefits that are not allowed by the plan's rules. This is where nonqualified deferred compensation plans may come into play. But, they are not for everyone. A nonqualified deferred compensation plan is typically only for owners and key management employees. If it also covers nonmanagement employees, it will unwittingly fall under the same requirements as qualified plans, adding cost, complexity and reporting requirements.