Transforming Employee Retention with Non-Qualified Deferred Compensation Plans
Strategic Wealth Innovations helps businesses combat employee turnover and manage risk through premium financing, CPA partnerships, qualified plans, and a holistic approach to financial well-being.
The High Cost of Employee Turnover
Job Hopping Culture
Today’s employees typically stay only 1.5 to 3 years before moving on for higher salaries and new opportunities.
Financial Impact
Employee turnover is extremely costly – including lost productivity, increased replacement salaries, and extensive training costs.
Business Continuity Risk
Excessive turnover causes loss of institutional knowledge and can create a cascade of failures that puts your entire business at risk.
Competitive Disadvantage
When employees leave for competitors, they take valuable insights about your strengths and weaknesses with them.
The Risk of Losing Key Personnel
1. The Risk of Losing Key Personnel
Having a key owner or employee pass away can put the entire business at risk. They may be the glue that holds the business together
2. Replacement Cost Burden
May cost 20% more to replace key employee, plus added costs over many years of salary increases. Replacing a $100k/year employee can cost you an additional $900k over 25 years
3. Knowledge Drain
Essential insights and expertise slip away unnoticed. This loss can create gaps in understanding and hinder progress. Preserving this knowledge is crucial for fostering innovation and maintaining a competitive edge.
4. Lack of Continuity
Loss of tribal knowledge of your business. This can be impactful if they are the resource for your IP or very effective in their position
When a key person leaves suddenly, it creates tremendous workflow disruptions and financial strain. Replacing a $100,000/year employee can cost an additional $900,000 over 25 years in increased compensation. The loss of institutional knowledge can be devastating, especially if they were responsible for intellectual property or critical business functions.
NQDC : The Retention Solution
Tax-Free Retirement Income:
Employees receive tax-free retirement income at no cost to them if they stay until vested (typically 5-10 years)
Living Benefits Protection:
With 1 in 3 owners/employees experiencing cancer, stroke, or heart attack in their lifetime, the plan provides up to $1 million in benefits
Death Benefit Security:
Company receives substantial death benefits if an employee passes away. Benefits depend on # of participates.
Selective Participation:
You choose who participates (requires 10+ owners/employees with average salary of $100k/year)
How Premium-Financed NQDC Works
Leverage Bank Financing
Premiums for this product are borrowed from the bank. The business only pays the interest for 8 years to fund this compensation plan.
Build Liquid Assets
After several years of funding, the business can borrow from the cash value of the plan. Interest payments are tax-deductible, lowering your business taxes.
Self-Liquidating Design
The plan is designed so the bank loan gets paid back from internal policy growth. Death benefits range from $500k (10 participants) to $1M+ (20+ participants).
Three Events That Trigger Payouts
Retirement
Tax-free income for life beginning at age 65. Amount depends on person’s age at start of plan.
Health Event
If a participant experiences cancer, heart attack, or stroke, the policy pays up to $1 million in benefits.
Death
Policy pays $500,000 to $1 million to the business upon death of an owner or employee.
Exceptional Business Benefits
17x
Potential ROI
Example: 25 participants, $1M death benefit, $3M investment can yield $50M return
$1M
Tax-Free Payout
Up to $1 million in tax-free cash upon employee death
$10M+
Business Value
Adds significant value to your business upon sale
Additional benefits include: living benefits if employees experience serious health conditions, tax-free retirement income for business owners, cash flow if employees don’t stay until vested, group insurance with no medical exams, tax-deductible interest payments, creditor protection through trust structure, and the ability to create intergenerational wealth.
Employee Value Proposition
Zero Cost Participation
Employees contribute nothing financially – they simply maintain steady work history and performance until vested.
Tax-Free Retirement
At retirement, they receive annual tax-free income (approximately ±10% of projected amount depending on their age when the plan started).
Health Event Protection
If they experience cancer, heart attack, or stroke (affecting approximately 30% of participants), they receive a portion of the benefits.
Redefine Your Retirement Journey
We believe that Employee retention is severely impacting small business help achieve their maximum potential. The NQDC Plan gives small business a competitive edge, manages risks to the company, and creates tax-free income to owners and employees. It also has the possibility of creating inter-generational wealth for small business owners.