The Executive Nonqualified "Excess" Plan^SM

How it Works

The Executive Nonqualified "Excess" Plan is a defined contribution deferred compensation plan that allows executives to defer pre-tax income in "excess" of qualified plan limits - potentially up to 100% of compensation. These plans are based on a contractual agreement between the employer and the executive(s) that results in the executive foregoing current compensation in exchange for a future benefit.

Employee Advantages

• Each executive elects to defer additional compensation in excess of the qualified plan limitations on a before federal and state tax basis - subject to FICA like a 401(k)*
• Earnings in the Executive Nonqualified "Excess" Plan account accumulate tax-deferred
• No excise penalties for early distributions (10%) or mandatory distributions at age 70-1/2
• No annual limitation on contributions. An executive can defer up to 100% of eligible compensation if the company allows
• Tailored investment strategy through self-directed investment accounts
• Internet access to account information - valued daily

* Contributions to the plan may not be tax deductible for state income tax purposes in Pennsylvania.

Company Advantages

• Solves a problem by creating a way for highly compensated executives to exceed all deferral limits in the qualified retirement plan(s) on a pre-tax basis
• Lost benefits due to compensation and deferral limits in qualified retirement plans can be replaced for a specific group of executives selected by the company
• Assets accumulated to finance the plan are held as corporate assets and may enhance the company's balance sheet
• Earnings from the company assets financing the plan may grow tax-deferred depending on the financing option selected
• Can choose to make matching and/or incentive profit-sharing contributions on a per-employee basis
• Simple to administer

Employee Considerations

• No loan provisions
• No rollover provision into an IRA
• Contractual obligation versus fiduciary liability
• Assets are owned by the company and are subject to company creditors
• Election to defer income only once per year in advance of earning income
• Deferrals reduce wages for qualified plan contributions unless coordinated with "Excess" Plan

Company Considerations

• Deferred income tax deduction versus a current income tax deduction
• Potential charge to earnings on the taxable investments or COLI assets purchased to finance the plan
• Plan level administrative service fees
• Human resource time to communicate the plan benefits to eligible participants

The Services You Need to Succeed

The Principal Financial Group^® (The Principal^®) is a leading national provider of nonqualified executive benefit programs. We have worked with thousands of companies and their professional advisors to help design, finance, implement and provide ongoing support for nonqualified plans. Utilizing extensive financing and technical expertise and state-of-the-art technology, we provide turnkey services including plan documentation, tailored employee communications and enrollment materials, as well as Internet-based, plan-level administrative services.

Approval #566272007