NONQUALIFIED DEFERRED COMPENSATION PLANS AND ETHICAL PRACTICES

Learning Objectives 1. Define Nonqualified Deferred Compensation (NQDC) Plans: • Understand and articulate the definition, mechanics, and the primary uses of NQDC plans. • Compare and contrast NQDC plans with qualified retirement plans, highlighting the unique advantages and potential drawbacks of each. 2. Explore Various Types of NQDC Plans: • Identify and describe different types of NQDC plans including Excess Benefit Plans and Supplemental Executive Retirement Plans (SERPs). • Analyze the strategic contexts in which each type of NQDC plan is most beneficial. 3. Security and Trust Structures for NQDC Plans: • Examine the use of trusts, such as Rabbi Trusts and Secular Trusts, to secure NQDC plan obligations. • Evaluate the benefits and limitations of using these trusts in securing employee benefits. 4. Taxation and Regulatory Compliance: • Discuss the taxation implications of NQDC plans for both employers and employees. • Ensure comprehensive understanding of IRC Section 409A regulations and their impact on the structuring and operation of NQDC plans. 5. Corporate Owned Life Insurance (COLI): • Investigate the role of COLI in NQDC plans, including its benefits and potential pitfalls. • Assess the implications of using life insurance as a funding mechanism for deferred compensation obligations. 6. Life Insurance in Executive Compensation Planning: • Examine different types of life insurance policies used in NQDC plans, focusing on cash value policies. • Analyze the federal taxation of life insurance and its impact on policy selection and compensation planning. • Understanding how to use life insurance in Executive Bonus plans (Section 162 Bonus plans) and in Golden Executive Bonus Arrangements. • Analyze Death Benefit Only (DBO) plans. 7. Types of Cash Value Life Insurance Policies: • Identify the various types of cash value life insurance policies that can be used with NQDC plans o Whole Life Insurance (WL) o Fixed Universal Life (FUL) o Fixed Index Universal Life (FIUL) o Variable Universal Life Insurance (VU) 8. Split Dollar Life Insurance Arrangements: • Understand the structure, benefits, and risks associated with Split Dollar life insurance arrangements. • Evaluate the suitability of Split Dollar arrangements in executive compensation and benefit planning. 9. Additional Deferred Compensation Vehicles: • Study alternative deferred compensation mechanisms such as: o 457 Plans, o Restricted Stock Options, o Restricted Stock Awards, o Restricted Stock Units, o Phantom Stock Plans, and o Stock Appreciation Rights. • Compare their uses, benefits, and limitations as part of a comprehensive executive compensation strategy. 10. Ethical Practices in the Insurance Industry: • Explore ethical issues specific to financial and insurance professionals dealing with NQDC plans. • Identify the importance of trust in the insurance industry and the ethical responsibilities of an insurance professional. • Relate to the unfair marketing practices. • Understand the NAIC Best Interest Standards 11. Navigating Ethical Dilemmas: • Develop a framework for navigating ethical dilemmas. • Develop steps for ethical decision-making. • Identify the general ethical principles to live by and work by. 12. Senior Fraud • Identify what is senior fraud and who commits senior financial fraud. • Understand your role as financial and insurance professionals in protecting your senior clients. • Explain the FINRA Rules: o FINRA Rule 4512 o FINRA Rule 2165 By achieving these objectives, participants will not only master the technical aspects of NQDC plans but also enhance their ability to uphold ethical standards in their professional practices.