American Benefit Corporation
Value of Non Qualified Deferred Comp American Benefit Corporation specializes in developing strategic solutions to executive benefit needs.
At American Benefit Corporation, we design, fund and manage executive non-qualified benefit plans for highly compensated corporate executives who wish to reduce current income taxes and form personal capital on a tax efficient basis. Established more than 30 years ago, we serve the unique needs of executives in numerous corporations with their personal capital formation objectives.
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American Benefit Corporation and its representatives are presently licensed to operate in particular states of jurisdiction and may operate only where licensed and, with regard to any particular product, where that product has been approved. American Benefit Corporation and/or James W. Herlihy are currently licensed to market insurance and investment products in Arizona, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Vermont.
The insurance and/or investment product information on this site is not intended for distribution or use in any states or jurisdictions where our company, its products, or representatives are not so licensed or approved.
Securities offered through M Holdings Securities, Inc. A Registered Broker/Dealer, member FINRA/SIPC. American Benefit Corporation is independently owned and operated.
American Benefit Corporation is a member of M Financial Group. Please go to www.mfin.com/DisclosureStatement for further details regarding this relationship.
Featured Case Study
Reduce Turnover With Corporate Match
A large east coast grocery store chain employed pharmacists in each of their stores. They were experiencing 40% turnover each year within this group and wanted a benefit plan that would increase their retention.
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The Value of Non-Qualified Deferred Compensation in an Increased Tax Environment
In 2011 the President Bush income tax rates will sunset and the top marginal income tax bracket will return to 39.5%. Many states, struggling
financially, have already raised their state income tax rate or are contemplating an increase. In addition, the long-term capital gain tax rate will
increase in 2011 from 15% to 20%.
A corporate sponsored non-qualified deferred compensation plan, regulated by IRC 409(A) will assist executives with the accumulation of personal capital on a tax efficient basis. This is illustrated in the following table.
|
Without Income Deferral |
With Income Deferral |
With Income Deferral & No State Income Tax in Retirement State of Residence |
|
|
Annual Savings |
$60,000 |
$60,000 |
$60,000 |
|
Net After-Tax Savings |
$36,000 |
$60,000 |
$60,000 |
|
Earnings Rate |
6% |
6% |
6% |
|
Net After-Tax Rate |
3.6% |
6% |
6% |
|
Accumulation at Retirement |
$591,132 |
$1,480,352 |
$1,480,352 |
|
Net After-Tax Annual Benefit |
$75,770 |
$110,604 |
$132,506 |
|
Increase in Annual After-Tax Income |
46% |
75% |
Assumptions:
Above illustration is based on an executive currently age 50, deferring/saving for 15 years and electing a 10-year payout at age 65.
| Current Tax Brackets: | Years 2011 forward tax brackets: |
| Federal 33% | Federal 39.5% |
| State 7% | State 10.0% |
| Total 40% | Total 49.5% |
This table compares the retirement funds accumulated by an executive with an after-tax strategy vs. a deferred compensation strategy. The deferred compensation strategy creates 46% more annual after-tax income than the after-tax strategy and if the retirement state of residence (Florida, New Hampshire, etc.) does not have a state income tax, the deferred compensation strategy creates 75% more annual after-tax income. The payout period must be ten (10) years or greater to avoid state income tax in the state where the funds were deferred.
This material is intended for informational purposes only and is not intended to replace the advice of a qualified tax advisor.
Investments in securities involve risks, including the possible loss of principal. When redeemed, shares may be worth more or less than their
original value.
Securities offered through M Holdings Securities, Inc., a Registered Broker/Dealer, Member FINRA/SIPC. American Benefit Corporation is independently owned and operated.