How should participant communications be handled for an NQDP?
The employee communications, enrollment materials, benefits statements, etc. for 401(k) plans typically refer to a participant’s balances as “your funds” or “your money.” Investment selections are “your investments” or “your assets” in “your retirement account.” This is entirely appropriate, since an individual’s retirement benefit in a 401(k) IS exactly equal to the market value of the assets in that participant’s account. Participant communications for an NQDP should be handled in such a way as to make a clear distinction between the nonqualified plan provisions and any qualified plans they are supplementing (or mirroring). Participants must be aware that the sponsor is not obligated to invest their deferrals and that the sponsor’s promise of payment is an unsecured obligation. Investment options available to the participants are only a means of measuring gains or losses to their deferral balances. While properly constructed trusts may protect against a change of heart, the participa
