Last week, I blogged "The GAO Looks at QSERPs (You Should Too)." Several readers asked to be reminded about just exactly what is a "QSERP." Good question. Sorry I wasn't clearer in last week's blog.
A QSERP is one of the names given to a perfectly legal strategy of shifting accrued or future benefits from a non-qualified retirement plan – where contributions are not immediately deductible, cannot accumulate tax-free, are available to creditors, and cannot be rolled over – to a qualified retirement plan – where contributions are immediately deductible, can accumulate tax-free, are not available to creditors, and can be rolled over (and that is only a partial list of the advantages). What makes this strategy legal is that most plan sponsors have additional room with the Internal Revenue Code's non-discrimination in benefits test. That is, there is space for additional benefits to accrue for highly compensated employees without a violation of the Code. Many individuals and employers with "cross-tested" retirement plans understand and use this space. The employer/plan sponsor can amend its qualified plan to slightly increase benefits for certain highly compensated employees and, following the limits of 409A, relieve itself of an obligation to provide non-qualified benefits to such employees.
It sounds simple and is, in concept. However, some legal and actuarial work/study is required to determine how much qualified plan benefits may be increased and navigating 409A. However, many companies have concluded that the time and expense are very well worth it to achieve superior protection and tax treatment for themselves and their employees.
Two historically significant sporting events occurred on August 3. In 1852, America's first intercollegiate athletic event was held as Yale and Harvard met for a crew race on Lake Winnipesaukee in Center Harbor, N.H., and on August 3, 1936, Jesse Owens won the 100 meter dash at Berlin Olympics, and Ralph Metcalfe finished second, pretty much shooting down Hilter's "superior Aryan race" propaganda (Owens also won the long jump August 4, the 200 meters on August 5, and the 4 x 100 m relay on August 9).