Accounting Guide: Nonqualified Deferred Compensation Plans

EBS has created this guide to provide an overview of the accounting for a non-qualified deferred compensation program structured as a voluntary deferral plan, as well as for the assets associated with commonly used informal funding arrangements. This 9-page document is meant to provide a general understanding of the accounting; more detailed information is available upon request.

It is important to understand that the accounting for such programs and funding arrangements can be complex. There is no single source or authority that covers the accounting treatment – it is drawn from a variety of accounting pronouncements. In addition, because of the flexibility of plan design of NQDC programs, the accounting can vary based on the specific plan structure or provisions.

A look inside:

  • Fundamental principles of Non-Qualified Deferred Compensation Plans/Salary Deferral accounting
  • Accounting for the Plan Liability, with examples/simplistic assumptions
  • Accounting for the Informal Funding Assets, with examples of two commonly used informal funding assets – Mutual Funds and COLI.

EBS has also created an Accounting Guide for another popular executive benefit program – Loan Regime Split Dollar.  You can download that Guide by clicking here.

This guide has been prepared for illustration purposes only.  Executive Benefit Solutions is an executive benefit consulting firm which does not provide legal, tax, or accounting advice.  A corporate plan sponsor should consult with its accounting, auditing, and tax professionals to ensure proper accounting treatment.

Download a copy of this Guide to gain a better understanding of how to account for this popular executive benefit program.