I am looking for information on setting up a top hat nonqualified deferred compensation plan for members of a limited liability company who receive self-earned income for services to the company.

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Did you find any answers to this issue? I have been researching this as well since my focus is on nonqualified benefit planning for small to mid-size companies and many of them are LLC's and S-Corps.

So far I have found that one of several forms of an Executive Split Dollar Plan are most effective for owners of entities with pass through taxing. I try to use the plan design that provides the best tax results in the end.

I'm sure you are probably already aware of this but there is a risk when dealing with companies that are closely held, whether it is a C-corp, S-corp or LLC, and the only participants in the plan are owners of the company. That risk is that the IRS will deem the nonqualified plan contributions a distribution instead of a plan contribution. I have never seen this happen but it is a risk that I always make my potential clients aware of and is also why I tend to favor the Executive Split Dollar Plan in many of these cases.

Any comments on this issue would be appreciated as I am always interest in new ways to assist my clients in their compensation and benefit needs!

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Robin Davis
D&D Benefits, L.L.C.


[This message has been edited by Robin Davis (edited 01-04-2000).]