Nationwide Mutual Insurance Company & Affiliated Companies is a group of large U.S. insurance and financial services companies based in Columbus, Ohio. The company also operates regional headquarters in Des Moines, Iowa, San Antonio, Texas, Gainesville, Florida, and Lynchburg, Virginia.
Nationwide Financial Services, a component of the group, was publicly traded on the New York Stock Exchange prior to being purchased by Nationwide Mutual in 2009.
What are the business benefits?
The Nationwide Corporate Incentive Program® (TNCIP) is a nonqualified, 401(k) mirror deferred compensation plan that provides benefits for both the employer and the top executives without the reporting and disclosure requirements of qualified plans and without the fiduciary responsibility and liability of qualified plans.
The term “401(k) mirror” means a type of unfunded, nonqualified deferred compensation plan that meets the “top-hat” exemption of the Employee Retirement IncomeSecurity Act. A viable option for the small to midsize employer, it:
Can be used to supplement or replace a qualified plan
Allows you to define who gets to participate in the plan
May allow for full employer cost recovery
What are the employee benefits?
The Nationwide Corporate Incentive Program is an attractive benefit to key employees because it:
May reduce their current income tax liability
Increases potential retirement income
Allows for deferrals in excess of the current qualified plan limitations
How TNCIP works
With TNCIP, the participant elects to defer a specific dollar amount or percentage of future compensation and chooses from a menu of crediting rate choices that may range from very conservative to very aggressive.
The employer may make matching contributions based on a formula or discretionary contributions as allowed in the agreement. Employee deferrals and any employer contributions are credited to the executive’s deferred compensation account, along with any periodic gains or losses.
The plan allows an executive to defer some or all of his/her current income, thereby avoiding current income tax. The deferred amount is credited to an account that may grow at a fixed rate or be tied to a variable rate of return such as a mutual fund or a variable insurance subaccount, which involves market risk including possible loss of principal.
Remember that tax laws are complex and can change over time. Individual tax situations may vary, and a tax professional can offer executives specific advice.
Why offer an executive bonus plan?
You have to have the right professionals working with you to get the job done. Do you have what it takes to retain the employees who mean the most to your business?
An executive bonus plan using life insurance from Nationwide® may provide just the incentive you need to hang on to your most important employees.
How bonus plans benefits employers
Certainly retention of top talent is the key advantage to bonus plans, but they also offer flexibility, control and tax benefits:
Bonuses are tax deductible for your business
You have discretion in selecting participants
There are no maximum or minimum contribution requirements
No IRS approval needed
The plan is designed to be simple and straightforward
Employees may find it beneficial to stick with you so they won’t lose the benefit
Restrictive Executive Bonus Arrangement (REBA)
In addition to executive bonus benefits listed above, the following benefits also apply:
“Golden handcuffs” are created through a restricted endorsement and vesting schedule
Vesting schedule allows employer to recover some or all of the additional compensation if things with the employee don’t work out
Restrictive endorsement requires employer approval for major changes to policy
Benefits for employees
The executive also gains a level of control and potential financial gains from this plan, including:
The policy funding the executive bonus plan is owned by the employee.
Any tax due on the bonus to the employee can be covered by an additional bonus from the company.
Cash values accumulate tax deferred.
Tax-preferred cash flow can be received from the policy by withdrawals and loans (assuming a non-modified endowment contract remains in force) .
The employee controls the plan including selecting the beneficiary and allocating the assets.
The employee chooses when to make retirement withdrawals and how much they will be.
It’s a life insurance policy rather than a 401k or IRA, so there isn’t a tax penalty for taking a withdrawal prior to age 59 ½. If the employee takes a withdrawal, his or her beneficiaries will receive a reduced death benefit.
Some things you and your employees should keep in mind
This strategy does not guarantee returns or insulate you from losses, including loss of principal.
As your personal situations change (e.g., marriage, birth of a child or job promotion), so will your life insurance needs; care should be taken to ensure that this strategy and product are suitable for your long-term life insurance needs.
You should weigh your objectives, time horizon and risk tolerance as well as any associated costs before investing.
Market volatility can lead to the possibility of needing additional premium in your policy to ensure it does not lapse.
Variable life products allow the policyholder to choose an appropriate amount of life insurance that has an additional cost associated with it.
Loans and partial withdrawals will reduce the cash value and the death benefits payable to your beneficiaries, and withdrawals above the available free amount will incur surrender charges.
Nationwide® and its representatives do not give legal or tax advice; you should consult your legal or tax advisor for answers to specific tax questions.
Surrender charges vary by issue age, gender, underwriting rate class and product; these charges decline over time, so please see your prospectus for details.
The death benefit and all guarantees are subject to the claims-paying ability of the issuing insurance company.
Nationwide Building Society has a comprehensive flexible benefits scheme from which 19,164 staff can select perks.
Prior to Nationwide's takeover of Portman Building Society, around 50% of employees actively selected flexible benefits through the firm's Choices scheme.
The plan has 15 options including environmentally-friendly initiatives such as a carbon offsetting option and a cycle-to-work scheme.
Rosemary Crabb, rewards analyst at Nationwide, explains: "Flexible benefits should be about genuine choice, offering a range of options that will help employees manage their salary package and lifestyle. We have a diverse workforce and our aim is to build a benefits package that will include something for everyone." She says that childcare vouchers have the biggest take up in terms of monetary value. Nationwide offers a 5% discount on top of the tax and national insurance savings that can be made by employees. In terms of numbers, the most popular flexible benefit is RAC breakdown cover, which more than 2,000 members of staff have taken up.
Through the Choices plan, employees can also top up their Fruitful Rewards Value Account into which non-cash awards and rewards are credited, including seasonal gifts and some bonuses. Staff can redeem their balance against a wide range of products, and discounted gift and retail vouchers.
The firm has concentrated in recent years on opposing the corporate trend toward reducing or eliminating employee benefits. We have become a leader in the field of ERISA litigation by bringing class and multi-plaintiff cases on behalf of employees whose companies have sought to illegally shed benefits costs.
In Millsap v. McDonnell Douglas, 162 F.Supp.2d 1262 (N.D.OK 2001) (entering judgment for plaintiffs), a class of 1,100 former management and union employees sued McDonnell Douglas for ERISA violations when it closed its Tulsa, OK plant. Our firm prevailed at trial and recovered $36 million in lost pension and medical benefits for the class. The court stated that "at trial, class counsel demonstrated a high degree of skill" and noted that "Mr. Mulder and his firm have extensive experience in representing plaintiffs in class-action litigation, and have achieved excellent results in other class action lawsuits. In fact, in the final analysis, the Court is persuaded that without the hard work, dedication and superior legal skills demonstrated by Class Counsel over the course of this case, there may well have been no recovery for the plaintiffs whatsoever." Millsap v. McDonnell Douglas, 2003 WL 21277124, *11-12, No. 94-CV-633-H(M) (N.D.Okla). May 28, 2003) (approving settlement).
In In re Sears Retiree Group Life Insurance Litigation, 2002 WL 475180, No. 94 C 7453 (March 27, 2002, N.D.Ill.), the firm achieved a massive class settlement with Sears over its decision to eliminate its retirees' life insurance coverage. The settlement provided $29 million to restore benefits and preserved an additional $200 million in benefits for the class, which numbered over 80,000 Sears retirees, including many members of Sears' former executive team. The District Court noted at the conclusion of the case that it was "settled after over four years of very active litigation by highly competent attorneys, resulting in a complex arrangement reached after lengthy negotiations." Id. at *1.
We are currently litigating a variety of cases that seek to recover lost employee benefits. In Nauman v. Abbott Laboratories, No. 04-C-7199 (N.D.Ill.), we are pursuing lost pension and health care benefits for hundreds of employees who were spun off to a new company, Hospira, Inc. That case has been certified as a class action and is moving toward trial. In Winnett v. Caterpillar, Inc., No. 3:06-0235 (M.D.Tenn.), we are fighting for health care benefits that were promised to retirees. That case is also certified as a class action, and we are currently seeking an injunction to prevent Caterpillar from continuing to illegally charge retirees for health care costs. And in Rogers v. Baxter, No. 04 C 6476 (N.D.Ill.), we are pursuing losses incurred by thousands of 401(k) plan participants due to breaches of fiduciary duty by the company and the plan fiduciaries.
The firm welcomes opportunities to build co-counsel relationships with other attorneys who seek a partner in ERISA cases. Please contact us to discuss potential employee benefits class actions. We also welcome inquiries from employees who believe they have been denied employee benefits to which they are entitled.
Nationwide Financial Services, a component of the group, was publicly traded on the New York Stock Exchange prior to being purchased by Nationwide Mutual in 2009.
What are the business benefits?
The Nationwide Corporate Incentive Program® (TNCIP) is a nonqualified, 401(k) mirror deferred compensation plan that provides benefits for both the employer and the top executives without the reporting and disclosure requirements of qualified plans and without the fiduciary responsibility and liability of qualified plans.
The term “401(k) mirror” means a type of unfunded, nonqualified deferred compensation plan that meets the “top-hat” exemption of the Employee Retirement IncomeSecurity Act. A viable option for the small to midsize employer, it:
Can be used to supplement or replace a qualified plan
Allows you to define who gets to participate in the plan
May allow for full employer cost recovery
What are the employee benefits?
The Nationwide Corporate Incentive Program is an attractive benefit to key employees because it:
May reduce their current income tax liability
Increases potential retirement income
Allows for deferrals in excess of the current qualified plan limitations
How TNCIP works
With TNCIP, the participant elects to defer a specific dollar amount or percentage of future compensation and chooses from a menu of crediting rate choices that may range from very conservative to very aggressive.
The employer may make matching contributions based on a formula or discretionary contributions as allowed in the agreement. Employee deferrals and any employer contributions are credited to the executive’s deferred compensation account, along with any periodic gains or losses.
The plan allows an executive to defer some or all of his/her current income, thereby avoiding current income tax. The deferred amount is credited to an account that may grow at a fixed rate or be tied to a variable rate of return such as a mutual fund or a variable insurance subaccount, which involves market risk including possible loss of principal.
Remember that tax laws are complex and can change over time. Individual tax situations may vary, and a tax professional can offer executives specific advice.
Why offer an executive bonus plan?
You have to have the right professionals working with you to get the job done. Do you have what it takes to retain the employees who mean the most to your business?
An executive bonus plan using life insurance from Nationwide® may provide just the incentive you need to hang on to your most important employees.
How bonus plans benefits employers
Certainly retention of top talent is the key advantage to bonus plans, but they also offer flexibility, control and tax benefits:
Bonuses are tax deductible for your business
You have discretion in selecting participants
There are no maximum or minimum contribution requirements
No IRS approval needed
The plan is designed to be simple and straightforward
Employees may find it beneficial to stick with you so they won’t lose the benefit
Restrictive Executive Bonus Arrangement (REBA)
In addition to executive bonus benefits listed above, the following benefits also apply:
“Golden handcuffs” are created through a restricted endorsement and vesting schedule
Vesting schedule allows employer to recover some or all of the additional compensation if things with the employee don’t work out
Restrictive endorsement requires employer approval for major changes to policy
Benefits for employees
The executive also gains a level of control and potential financial gains from this plan, including:
The policy funding the executive bonus plan is owned by the employee.
Any tax due on the bonus to the employee can be covered by an additional bonus from the company.
Cash values accumulate tax deferred.
Tax-preferred cash flow can be received from the policy by withdrawals and loans (assuming a non-modified endowment contract remains in force) .
The employee controls the plan including selecting the beneficiary and allocating the assets.
The employee chooses when to make retirement withdrawals and how much they will be.
It’s a life insurance policy rather than a 401k or IRA, so there isn’t a tax penalty for taking a withdrawal prior to age 59 ½. If the employee takes a withdrawal, his or her beneficiaries will receive a reduced death benefit.
Some things you and your employees should keep in mind
This strategy does not guarantee returns or insulate you from losses, including loss of principal.
As your personal situations change (e.g., marriage, birth of a child or job promotion), so will your life insurance needs; care should be taken to ensure that this strategy and product are suitable for your long-term life insurance needs.
You should weigh your objectives, time horizon and risk tolerance as well as any associated costs before investing.
Market volatility can lead to the possibility of needing additional premium in your policy to ensure it does not lapse.
Variable life products allow the policyholder to choose an appropriate amount of life insurance that has an additional cost associated with it.
Loans and partial withdrawals will reduce the cash value and the death benefits payable to your beneficiaries, and withdrawals above the available free amount will incur surrender charges.
Nationwide® and its representatives do not give legal or tax advice; you should consult your legal or tax advisor for answers to specific tax questions.
Surrender charges vary by issue age, gender, underwriting rate class and product; these charges decline over time, so please see your prospectus for details.
The death benefit and all guarantees are subject to the claims-paying ability of the issuing insurance company.
Nationwide Building Society has a comprehensive flexible benefits scheme from which 19,164 staff can select perks.
Prior to Nationwide's takeover of Portman Building Society, around 50% of employees actively selected flexible benefits through the firm's Choices scheme.
The plan has 15 options including environmentally-friendly initiatives such as a carbon offsetting option and a cycle-to-work scheme.
Rosemary Crabb, rewards analyst at Nationwide, explains: "Flexible benefits should be about genuine choice, offering a range of options that will help employees manage their salary package and lifestyle. We have a diverse workforce and our aim is to build a benefits package that will include something for everyone." She says that childcare vouchers have the biggest take up in terms of monetary value. Nationwide offers a 5% discount on top of the tax and national insurance savings that can be made by employees. In terms of numbers, the most popular flexible benefit is RAC breakdown cover, which more than 2,000 members of staff have taken up.
Through the Choices plan, employees can also top up their Fruitful Rewards Value Account into which non-cash awards and rewards are credited, including seasonal gifts and some bonuses. Staff can redeem their balance against a wide range of products, and discounted gift and retail vouchers.
The firm has concentrated in recent years on opposing the corporate trend toward reducing or eliminating employee benefits. We have become a leader in the field of ERISA litigation by bringing class and multi-plaintiff cases on behalf of employees whose companies have sought to illegally shed benefits costs.
In Millsap v. McDonnell Douglas, 162 F.Supp.2d 1262 (N.D.OK 2001) (entering judgment for plaintiffs), a class of 1,100 former management and union employees sued McDonnell Douglas for ERISA violations when it closed its Tulsa, OK plant. Our firm prevailed at trial and recovered $36 million in lost pension and medical benefits for the class. The court stated that "at trial, class counsel demonstrated a high degree of skill" and noted that "Mr. Mulder and his firm have extensive experience in representing plaintiffs in class-action litigation, and have achieved excellent results in other class action lawsuits. In fact, in the final analysis, the Court is persuaded that without the hard work, dedication and superior legal skills demonstrated by Class Counsel over the course of this case, there may well have been no recovery for the plaintiffs whatsoever." Millsap v. McDonnell Douglas, 2003 WL 21277124, *11-12, No. 94-CV-633-H(M) (N.D.Okla). May 28, 2003) (approving settlement).
In In re Sears Retiree Group Life Insurance Litigation, 2002 WL 475180, No. 94 C 7453 (March 27, 2002, N.D.Ill.), the firm achieved a massive class settlement with Sears over its decision to eliminate its retirees' life insurance coverage. The settlement provided $29 million to restore benefits and preserved an additional $200 million in benefits for the class, which numbered over 80,000 Sears retirees, including many members of Sears' former executive team. The District Court noted at the conclusion of the case that it was "settled after over four years of very active litigation by highly competent attorneys, resulting in a complex arrangement reached after lengthy negotiations." Id. at *1.
We are currently litigating a variety of cases that seek to recover lost employee benefits. In Nauman v. Abbott Laboratories, No. 04-C-7199 (N.D.Ill.), we are pursuing lost pension and health care benefits for hundreds of employees who were spun off to a new company, Hospira, Inc. That case has been certified as a class action and is moving toward trial. In Winnett v. Caterpillar, Inc., No. 3:06-0235 (M.D.Tenn.), we are fighting for health care benefits that were promised to retirees. That case is also certified as a class action, and we are currently seeking an injunction to prevent Caterpillar from continuing to illegally charge retirees for health care costs. And in Rogers v. Baxter, No. 04 C 6476 (N.D.Ill.), we are pursuing losses incurred by thousands of 401(k) plan participants due to breaches of fiduciary duty by the company and the plan fiduciaries.
The firm welcomes opportunities to build co-counsel relationships with other attorneys who seek a partner in ERISA cases. Please contact us to discuss potential employee benefits class actions. We also welcome inquiries from employees who believe they have been denied employee benefits to which they are entitled.