Case Study 1

A Flexible Retention Tool

A privately held international consulting company had a group of approximately 100 highly compensated consultants they were hoping to retain on a long term basis. American Benefit Corporation implemented a deferred compensation plan where the participating executives could defer a percentage of their pre-tax base and bonus compensation. The company agreed to make discretionary plan contributions each year that were dependent upon the company and individual achieving predetermined goals. These company contributions are subject to a vesting schedule which serves as a retention tool.

The executive plan participants were concerned with their status as unsecured creditors of the corporation so the plan document directed that all vested account balances be paid out in full every five years unless the executive elected against the distribution thirteen (13) months in advance of its payment and then it was deferred for another five years. This strategy provided the greatest flexibility while minimizing the exposure for the executive.