Executive compensation isn’t just about rewarding performance. It’s a tool that helps attract, retain and motivate top talent while supporting long-term financial success. When appropriately structured, Non-Qualified Deferred Compensation (NQDC) plans, stock options, and Restricted Stock Units (RSUs) can move the needle in a big way. Here, Meghan Hannon, CRPS®, CPFA®, Partner and Head of Retirement Plan Consulting, and Anika Lunde, Financial Planner, demonstrate how these strategies work together to create meaningful results.
Crafting Value with NQDC Plans
NQDC plans enable executives to defer a portion of their income, lowering their current taxable earnings while providing tax-deferred growth opportunities. Unlike traditional retirement plans, these plans offer greater flexibility when structuring payout schedules, helping participants align distributions with future financial needs. By deferring income, they can better manage their tax liability while setting aside funds for major life goals.
From an employer’s perspective, NQDC plans are a retention tool. They can be structured to tie payouts to tenure or performance metrics, reinforcing long-term commitment while rewarding key employees.
Stock Options: Aligning Interests for Growth
Stock options grant executives the right to purchase company stock at a fixed price, directly linking their personal financial success and the company’s growth. Their potential for exponential value makes them an attractive part of a compensation package, especially in high-growth environments. There are two common types of stock options: Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs). ISOs offer tax advantages under specific conditions, while NSOs allow for greater flexibility but are taxed as ordinary income when used. Regardless of the type, stock options encourage executives to think like shareholders, with goals centered around long-term growth.
RSUs: Rewarding Stability and Success
RSUs add another layer of value by offering executives stock grants that vest over time. Unlike stock options, RSUs retain their worth even if the share price doesn’t increase, making them a more predictable and stable component of a compensation package. Because RSUs typically come with time-based or performance-based vesting schedules or criteria, they provide a strong incentive for executives to remain with the company and contribute to its success. While these awards are taxed as income upon vesting, strategic planning can help minimize the impact. For both employers and employees, RSUs offer a structured approach to rewarding performance while ensuring continued commitment.
Building a Cohesive Executive Compensation Strategy
The real power of these compensation tools is how they work together. A well-designed package blends NQDC flexibility, stock option growth potential, and RSU stability to support both corporate and individual financial goals. Companies that take a thoughtful approach to structuring these benefits strengthen retention and enhance alignment between executive leadership and long-term business success.
For executives, understanding the nuances of each component—how they impact taxes, financial planning, and overall wealth accumulation—is key to making the most of their compensation package. With the right strategy, these benefits become more than just incentives; they serve as a roadmap for financial security and professional success.
Helping You Get There…
A well-designed executive compensation strategy does more than reward performance—it builds financial security, strengthens leadership retention, and aligns company goals with executive success. Thoughtfully combining NQDC plans, stock options, and RSUs, organizations can create a competitive advantage while helping key employees maximize their wealth potential. Connect with a member of the Boulay Financial Advisors, LLC team to learn more about our commitment to helping you get there.
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