401 (k) Mirror

Nonqualified deferred compensation plans are flexible and have a wide range of purposes other than reducing tax liability. Properly designed, a deferred compensation arrangement can provide benefits comparable to those available under a qualified 401(k) plan.

Combine qualified and nonqualified plans. Coupling a nonqualified plan with a qualified 401(k) plan may help mitigate the effect of the IRC limits on the amounts that can be deferred under 401(k) plans: A highly compensated employee can defer salary into the nonqualified plan after reaching the limit on elective deferrals for a particular year under the 401(k) plan. The nonqualified plan can be designed to take into account matching contributions attributable to 401(k) contributions that are made to the nonqualified plan as a result of plan limitations. The nonqualified plan may also permit employees to irrevocably elect to receive their bonuses currently or in the form of deferred compensation. The nonqualified plan would include a "rabbi trust" in order to protect plan assets from all creditors except bankruptcy creditors .