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A nonqualified deferred compensation plan (DCP) is an executive benefit plan that allows executives to defer, before tax, an unrestricted amount of compensation (salary, bonus and certain forms of equity) and to elect to receive that compensation plus any earnings as a distribution at a future time. Unlike 401(k) plans, nonqualified deferred compensations plans are not subject to discrimination testing. From the company’s perspective, these compensation deferrals are viewed as a future promise to pay and are typically structured with an offsetting asset to ensure minimal or no P&L impact to the company. These assets are often held in trust and can grow on a tax favored basis. Mezrah Consulting provides consulting services in designing, implementing and funding new DCPs, as well as ongoing administration for plans through our cloud-based map benefits ® platform. We also audit existing plans to assess the competitiveness, appropriateness of their design, administration and financing with the goal of minimizing plan costs for the company and maximizing benefits for executive participants. Typically, a 17% annual deferral is required to meet a targeted 80% income replacement at retirement. Highly compensated employees are unable to meet this goal without a DCP due to 401(k) contribution limitations. More Information For more information contact Todd Mezrah at (813) 367-1111 or tmezrah@mezrahconsulting.com. Visit our website at mezrahconsulting.com to learn more. Who We Are Mezrah Consulting, based in Tampa, Florida, is a national executive benefits and compensation consulting firm specializing in plans for sizable publicly traded and privately held companies. For more than 30 years, we have focused on the design, funding, implementation, securitization and administration of nonqualified executive benefit programs, and have advised more than 300 companies throughout the U.S. As a knowledge-based and strategy-driven company, we offer clients highly creative and innovative solutions by uncovering value and recognizing risks that other firms typically do not see. Custom nonqualified benefit plans are administered through our affiliate map benefit s®, a proprietary cloud-based plan technology platform that provides enterprise plan administration for nonqualified plans, including reporting and functionality for plan participants and plan sponsors. Securities offered through Lion Street Financial, LLC. (LSF), member FINRA & SIPC. Investment Advisory Services offered through Lion Street Advisors, LLC (LSA). LSF is not affiliated with Mezrah Consulting. LSF, LSA and Mezrah Consulting do not offer legal or tax advice. Please consult with the appropriate professional regarding your individual circumstances.

Preparing for and executing an equity-realizing event requires quite a bit of strategic thought and discipline. More important, it requires a leadership team that is focused, motivated and committed to see things through over the long run. Given the preparation required—and the risks and volatility associated with the equity markets— it is smart to consider establishing nonqualified executive benefit plans prior to going public. Here’s why— Add to the company story by positioning that the executive leadership team has been locked down by establishing an LTIP that is based on performance and years of service and that executive account balances and annual contributions will vest over time. Tie nonqualified plan contributions to company milestones after an IPO or could provide the structure needed to create a one-time bonus that is contributed immediately upon the company going public, then vested over time. Provide a competitive overall executive compensation package. Give your executives an opportunity to defer income including equity forms of compensation, which can include RSUs and PSUs, and can be deferred either prior to grant or 6 to 12 months prior to vesting, depending on the form of equity. It’s easier to implement a plan before IPO, as it avoids involving an executive compensation committee and the board of directors. Pre-IPO, there are no public disclosures when implementing a plan. Post-IPO, the company is required to disclose executive benefits in the Summary Compensation table and other tables required by the SEC based on plan design. No one really knows how the market will react to the company’s valuation and open-market stock price. It is a constant unknown and provides substantial risk especially during the initial lockout period which could last 6 months or longer after a company’s IPO. A nonqualified plan can be a great supplement and offset to this risk. If you plan on going public, consider the ease of implementing a plan prior to going public. It sends a compelling message to your executives and, more important, to the financial markets as it relates to positioning your company for future success by retaining your key executive talent. Securities offered through Lion Street Financial, LLC. (LSF), member FINRA & SIPC. Investment Advisory Services offered through Lion Street Advisors, LLC (LSA). LSF is not affiliated with Mezrah Consulting. LSF, LSA and Mezrah Consulting do not offer legal or tax advice. Please consult with the appropriate professional regarding your individual circumstances. Download a PDF version of this article:

An IPO is a milestone event for a company and its executives. Public company management teams and their boards need to always explore ways to better attract and retain executive talent. A nonqualified deferred compensation plan (DCP) is a common executive benefit offered by more than 70% of public companies. Establishing a DCP for your executives and senior management provides significant benefits to the company and plan participants with no P&L impact to the company. A DCP allows executives to defer income above qualified plan limitations inherent in 401(k) plans, as well as to defer restricted stock units (RSU) and performance stock units (PSU). The ability to defer RSUs/PSUs, which may have significantly increased in value post-IPO, provides a material financial benefit to executives. From the company’s perspective, these compensation deferrals are viewed as a future promise to pay and are typically structured with an offsetting asset to ensure minimal or no P&L impact to the company sponsor. These assets are often held in trust for the benefit of the executives. Advantage of Deferral vs. Taxable Investment 37% Tax Rate $828,566 or 114% 45% Tax Rate $814,561 or 150% Blended Tax Rate $664,844 or 116% Note* Assumes executive age of 45, 7 annual deferrals of $50K, a net rate of return of 8%, and 20 annual payouts beginning at age 65 (note: payouts in the DCP are taxable when taken). Blended tax rate assumes 37% in years 1-5, 45% in years 6-10 and 50% in years 11+. Cumulative after-tax payouts assume 3.8% tax on investment income associated with the healthcare reform legislation. Mezrah Consulting provides a full complement of services to design, implement and fund new DCPs while also providing the ongoing administration for plans through our software-as-a-service (SaaS) platform, mapbenefits®. The Cumulative After-Tax Payouts comparison graphic illustrated to the right, demonstrates the power of pre-tax compounding of deferrals invested on a tax deferred basis. The bars on the left, indicate the future value of compensation assuming no deferral (taxes paid on compensation including earnings). The bars on the right, illustrate the future value of deferred compensation invested on a tax deferred basis. Benefits to the Executive Pre-tax wealth accumulation opportunity for executives Allows pre-tax deferrals of salary, bonus, severance, RSUs and PSUs Restores benefits lost due to 401(k) limits Allows the executive to maintain the full number of RSUs/PSUs upon vesting as there is no forced sale to pay taxes Provides participants with flexible payout options (e.g. retirement, separation, specified date, etc.) Allows executives to select from a variety of investment funds including a fixed rate of return Benefits are secure as deferred dollars are held in trust by an independent third party given a change in control, change in heart or the company’s inability to pay Plan balance is beyond the reach of creditors or judgments of the executives Benefits to the Company A highly visible benefit Provides deferral opportunity with minimal or no impact to corporate earnings Cost recovery for the corporation Funding dollars can accumulate on a tax-favored basis Remain competitive within the industry Improves executive retention and attraction Maximizes 162(m) deduction Corporate Cost Summary Financial Assumptions Average Age of Census: 45 Retirement Age: 65 Annual Deferral: $1,000,000 Years to Defer: 7 Benefit Payout Duration: 20 Years Net Rate of Return: 8% Corporate Tax Rate: 26.5% Benefit Payout Source: Corporate Cash Securities offered through Lion Street Financial, LLC. (LSF), member FINRA & SIPC. Investment Advisory Services offered through Lion Street Advisors, LLC (LSA). LSF is not affiliated with Mezrah Consulting. LSF, LSA and Mezrah Consulting do not offer legal or tax advice. Please consult with the appropriate professional regarding your individual circumstances. Download a PDF version of this article:

Companies are now allowing executives to defer their restricted stock units (RSUs) and performance stock units (PSUs) into their nonqualified deferred compensation plans (DCPs). This gives executives the opportunity to defer the income on the growth of the stock and to eventually diversify out of the stock and effectively de-risk their net worth. Did you know that the projected cumulative benefits associated with deferring RSU/PSU into a DCP versus receiving them as income can be a win-win for executives and the company’s shareholders? Advantages of Deferring RSUs/PSUs Deferral of income taxes on RSU/PSU value Tax-deferred wealth accumulation on an RSU/PSU pretax balance Opportunity to preserve equity position upon vesting Ability to diversify into a variety of investment managers Positive P&L impact to the company No cash flow cost to the company Considerations and Risks of Deferring RSUs/PSUs Subject to market fluctuations of the company’s underlying stock and/or diversified investment choices Considered income upon vesting The graphic below compares the projected cumulative benefits associated with deferring RSUs/PSUs into a deferred compensation plan versus receiving them as income and reinvesting the after-tax proceeds into a diversified taxable securities portfolio. Financial Assumptions* RSU / PSU Grant Amount: $1,000,000 RSU / PSU Share Value Growth Rate: 8.0% RSU / PSU Vesting Period (Years): 3 Pre-Distribution Growth Period (Years): 10 Income Tax Rate1: 40.8% State Income Tax: 8.0% Diversified Portfolio Growth Rate: 8.0% Payout Duration (Years): 10 *Assumes no state income taxes when DCP payouts occur. 1 Includes 3.8% tax on investment income associated with healthcare legislation. Election Options Given IRC § 409A, there are three options for timing of elections for executives to defer RSUs/PSUs into a DCP: Elect to defer RSUs and PSUs prior to grant Elect to defer RSUs prior to vesting Elect to defer PSUs prior to vesting All three options provide an executive with the opportunity to diversify their current equity position within the company and invest a pretax amount of money that will then grow on a tax-favored basis. The DCP may be structured to allow some or all of the deferred RSUs and/or PSUs to be retained in the form of deferred stock, if the company has a minimum equity participation guideline at the executive level. Deferred Compensation Plans Mezrah Consulting can be engaged to provide guidance and consulting on designing and establishing a new DCP or auditing an existing plan. Our approach is consultative and includes all aspects of deferred compensation plans including: Design and funding Proxy disclosure Implementation, enrollment and plan administration Tax and payroll deductibility Accounting Plan documentation and security Plans can be flexible and provide executives with an opportunity to choose from a variety of investment funds including fixed rate of return, deferring from multiple sources of income, and electing from a variety of payout options, including specified date distributions. For more information contact Todd Mezrah at (813) 367-1111 or tmezrah@mezrahconsulting.com or learn more at MezrahConsulting.com. Securities offered through Lion Street Financial, LLC. (LSF), member FINRA & SIPC. Investment Advisory Services offered through Lion Street Advisors, LLC (LSA). LSF is not affiliated with Mezrah Consulting. LSF, LSA and Mezrah Consulting do not offer legal or tax advice. Please consult with the appropriate professional regarding your individual circumstances. Download a PDF version of this article:

Mezrah Consulting founder and CEO, Todd Mezrah, is a featured guest on the ForbesBooksAudio podcast. Listen in on Todd’s interview with host Joe Pardavila and their discussion about what it takes to be a business athlete. [The episode is also available on Apple, Spotify, and wherever you get podcasts.] #businessathlete#entrepreneurship#mezrahconsulting https://lnkd.in/d6Dh-MGU

Mezrah Consulting is proud to support "Clays For a Cure", a Sporting Clay Tournament to benefit Moffitt Cancer Center. Proceeds from this event, taking place on Friday, September 24, 2021, will go to Bay Area Advisors to support Moffitt Cancer Center's vision to transform cancer care through service, science and partnership. Please contact Denise Parker, FEI Tampa Bay Chapter Administrator, at sdeniseparker@yahoo.com or by phone at 813-494-9551, for more information.

Click here to download a briefing about “Retirement Planning in the Era of COVID-19.” As uncertainty from the COVID 19 pandemic and declining markets continue, we know communication with our clients is critical. To help assist you with navigating the investment landscape and maintaining a long-term perspective, M Financial Group has prepared the attached piece “Retirement Planning in the Era of COVID-19” to share with our clients.

July 16, 2021 Download our 2021 Proposed Tax Changes Summary which provides a snapshot of the changes proposed for this year.

There are many effective tax-planning tools for corporations who are looking to incentivize employees. Restricted Stock Units (RSUs) or Performance Stock Units (PSUs) have some unique characteristics, which make them preferable to actual stock, for many who are assembling executive compensation plans. As a result, companies are exploring the ability to expand their deferred compensation plans to include other forms of compensation that can effectively be deferred into the plan on a pre-tax basis, namely RSUs and PSUs. Many companies now use RSUs with the potential for further tax deferral into their nonqualified deferred compensation (NQDC) plan. RSUs are not issued in the form of actual stock; rather they are notational shares that are measured and valued against the company’s stock. The company issues restricted stock units with similar restrictions as stock options, but the advantages are that the entire value and taxation of the units may be deferred to a future date without a §83(b) election. So instead of paying tax when the RSUs vest and placing the funds received in taxable securities, any units issued may continue to be deferred into an NQDC plan where the units’ value will grow without any current tax consequences to the employee. See Exhibit I below that displays the economic advantage of deferring RSUs. However, many forms of equity compensation treated as “deferred compensation arrangements” must comply with an extensive and complicated section of the Internal Revenue Code. Given IRC § 409A, there are two options for executives to defer RSUs into their deferred compensation plan: Elect to defer RSUs before the grant has been made – prior to the grant of RSUs, a participant can elect to defer a percentage of their RSUs to be deferred until a future selected date (e.g. specific date, separation of service, or retirement). Elect to defer RSUs that have not yet vested – for those RSUs that have been granted but not vested, a participant can elect to defer the non-vested RSUs at least 12 months prior to the RSUs’ vesting date and can then elect for them to be received at least 5 years from the date of vesting. Both options provide an executive with the opportunity to diversify their current equity position within the company and invest a pre-tax amount of money that will then grow on a tax-favored basis. Alternatively, the deferred compensation plan may be structured to allow some or all of the deferred RSUs to be retained in the form of deferred stock if the company has minimum equity participation guidelines at the executive level. It is also possible to limit the deferral amount to only a portion of the RSUs if the company prefers executives to receive a portion of their vested shares. With RSUs as part of an executive’s compensations plan and the need for advanced tax planning in this ever-changing economy, NQDC plans are a great benefit for both executives as well as the issuing companies. By utilizing the NQDC plan, the employee alleviates the tax-related issues associated with restricted stock and companies can create an attractive compensation package to recruit, retain and reward key executives within the organization. Specifically, RSUs can have a positive impact on a participant’s financial position while allowing them to more broadly diversify their net worth. Careful planning with the assistance of a third party administrator should ensure IRS compliance and well-executed executive plans. For more information about RSU and PSU deferral plans, please contact Mezrah Consulting. Disclosure: This information is intended for educational purposes only and should not be construed as tax advice. You should talk with a tax professional before making any decisions.

You can now access your Deferred Compensation Plan through your mobile device! The mapbenefits mobile app brings you the ability to view your account information and complete your annual enrollment right on your mobile device. Through the mapbenefits mobile app you will be able to: Track account balances and fund details, including fund performance View deferral, payout, and beneficiary elections View Plan Overview Book Contact your Account Manager Enroll online during the open enrollment period Preview the App:Download the App now: We’ve simplified your experience to bring the most used pages of the mapbenefits website to you on the mobile device platform of your choice. We hope you find the new mobile app to be user-friendly and of value. Should you have any questions or feedback, you may submit your inquiry directly on the mobile app using the Contact Us feature. Alternatively, you may reach out to your Account Manager at mezrahclientservices@mezrahconsulting.com or (813) 367-1111.

When most people think about compensation, few think about severance as a form of compensation they will receive. It is important to plan for all contingencies regardless of their likelihood. Severance from employment can occur for a variety of different reasons unrelated to your performance including a corporate change in control or ownership, a change in corporate leadership or just as a result of normal cost cutting. Severance benefits can make up a meaningful part of compensation that often is currently not needed. Depending on the length of severance, it may not take long to find another opportunity thus creating unnecessary excess compensation and taxes. Many may want to take time off upon separation but rarely does the time off last more than a few months. There may be other forms of compensation that may vest, especially if one’s severance is the result of a change in control, the aggregate of which could result in excess parachute payments and excise taxes. For these reasons, many executives may choose to defer their severance benefits (or part of their severance) into a non-qualified deferred compensation plan and warehouse that cash on a pre-tax basis to be distributed at a future point in time. While severance is not always thought of as a traditional form of compensation, it can be included as a form of compensation that can be deferred. This is traditionally done through the “company contribution” provision within the plan that allows for the company to make discretionary contributions into the deferred compensation plan on behalf of the executive. When one is terminated from employment and severance is offered, the parties may agree to have some, or all of the severance paid in the form of a company contribution to the deferred compensation plan. Hypothetical example for illustrative purposes only. Actual results will vary. In the event of a change in control or ownership, 26 U.S. Code §280G limits the amount of compensation an executive can receive as a result of such change. In this situation, compensation (including severance) paid to the executive which exceeds three (3) times the executive’s gross income are considered “excess parachute payments.” Under 26 U.S. Code §4999, excess parachute payments are not deductible by the employer and the executive is subject to an additional 20% excise tax on these amounts. How to Defer Severance There are generally only three (3) ways one can defer severance: In the original employment or severance agreement, the severance benefit or some percentage thereof is structured to be deferred; If severance has not been offered yet in the form of a formal agreement or employment agreement; If a current severance right exists at the time termination occurs, and the payout is scheduled to occur more than 12 months after termination. Simply stated, if a severance plan already exists and there is a legal obligation in place to pay severance within 12 months after termination, then it is generally too late to defer the severance. Planning is paramount when including severance in one’s employment agreement; either severance needs to be elected to be deferred prior to a formal agreement going into place or the severance payments need to be designed to be delayed for at least 12 months after termination to allow the participant to make a deferral election at the time of termination. This delay can allow one to accommodate IRC 409A by making an election to defer severance 12 months prior to the date it is scheduled to be received. This will only be permitted if the executive defers the income for at least five (5) years from the date they would have otherwise received the income. In the event of a change in control or ownership, there are several ways to reduce the impact of severance agreements under 26 U.S. Code §280G. Traditionally, severance paid as a result of termination upon a change in control are included in the calculation of excess parachute payments. However, severance agreements can be amended and/or modified to reclassify such payments as reasonable compensation effectively removing them from the calculation of excess parachute payments, if they are put in place at least one (1) year prior to a change in control or ownership. Below are four (4) different ways to reposition severance benefits to avoid the negative tax impacts of §280G: Restructure the agreement so that normal severance only applies to a termination prior to or more than 24 months after a change in control, and cap severance payments within 24 months of a change in control at the three (3) times gross pay limit when combined with other severance payments; Restructure all or parts of severance amounts that might otherwise be payable as severance as a company contribution allocated to the deferred compensation plan with appropriate vesting during employment; Recharacterize severance as reasonable compensation for personal services over a period of time after a change in control; Recharacterize severance as a payment for adhering to an enforceable non-compete agreement. If severance has not yet been offered, then one can elect to defer all or part of their severance prior to entering into a binding agreement to receive it. Having the ability to make a planning decision ahead of time could save an executive a significant amount of unnecessary taxes and provide him or her with an opportunity to accumulate wealth on a pre-tax basis for retirement purposes. If the income is not needed due to another job already being secured or the release of other types of income, deferring severance benefits can make a lot of sense from an overall financial planning perspective.

For organizations to thrive in today’s economy, finding and retaining the best executives is vital. Given the unprecedented challenges and increased competition blooming across a myriad of industries, retaining top executive talent is crucial. Many companies tend to be myopic as it relates to understanding the true cost of losing an executive. It is important for companies to focus on the “total” costs that will accompany the loss of an executive, particularly an extremely talented executive. The real cost of executive turnover is, for the most part, an unknown. This is largely due to the fact that most companies don’t have systems in place to track exit costs which can include the following: Recruiting Interviewing Hiring Orientation Training Lost productivity Potential customer dissatisfaction Reduced or lost business Administrative costs Lost expertise It takes collaboration among departments (HR, Finance, Operations) which, in effect, need to develop tools to measure these costs concomitant with reporting mechanisms. As we all know, collaboration between two departments, much less multiple departments, on any issue can be challenging. Traditionally, most people think that the costs of losing an executive are just “explicit” costs which are more tied to fees paid to a search firm to find a replacement. However, the more impactful costs are the “implicit” costs of losing a key executive, also known as opportunity costs. Thus, the summation of explicit and implicit costs illuminate the true cost (i.e., total cost) of losing an executive. Generally speaking, the total cost can be approximately 200 - 300 percent of the executive’s salary. In 2019, according to Statista (1), 16.5% of executive teams (CEOs, CFOs and COOs) turned over. Also in 2019, according to the Work Institute (2), a shocking 42 million people voluntarily left their jobs. This equates to 27% of the workforce. This was an increase of over 2 million in 2018, which saw 40 million voluntary departures and an increase of over 88% since 2010. It is important for companies to find ways to reduce the likelihood of this loss by creating and/or enhancing incentive plans. These plans should be designed to embrace executive retention, amplify cost savings and, more importantly, preserve the value of the enterprise. Explicit Costs Executives should be of paramount importance given the high costs associated with their turnover. Direct replacement costs, or explicit costs, can include search fees, legal fees (employment agreements, severance and non-compete agreements, etc.), advertising, background check and time spent internally (interviewing, screening and personal assessments) all of which can equate to 50-60% of one’s salary. For instance, suppose a 45-year-old executive makes $250,000 annually, then decides to work for a different organization. Under the general assumption, tangible direct replacement costs and other related costs would range from $125,000-$150,000. Implicit Costs Explicit costs represent just part of the true cost of losing an executive: implicit costs can also be impactful. The time necessary to replace the executive alone would constitute a high opportunity cost. The alternative where the executive stays and remains productive during the same time period is usually preferred. This opportunity cost can entail other factors, such as a negative work atmosphere that contributes to employee disengagement. Per Gallup, employee disengagement costs the US economy upwards of $350 billion per year (3) (note: other employees who see high turnover tend to disengage and lose productivity). From a company standpoint, the lost productivity and engagement of employees associated with a departed executive can create costs equal to $10,000 or more per year, per employee. For example, if an executive’s departure impacts even just 10 employees, implicit costs associated with disengagement alone could total $100,000. Other implicit costs that need to be considered are as follows: Cost of Onboarding - training and management time. Lost Productivity - it may take a new employee one to two years to reach the productivity of an exiting executive. Lack of Customer Service and Increased Errors - for example, new employees take longer and are often less adept at solving problems. Long Term Training Cost - over two to three years, a business will invest 10 to 20 percent of an employee’s salary or more in training. Cultural Impact - whenever someone leaves, others take time to ask why. Losing a key member of your team can be extremely painful and challenging for the entire organization. Moreover, it can create costs that most have never considered or even know how to measure. What is the solution? How can companies reduce or even eliminate the economic impact of unexpectedly losing a key executive? Pay to Stay vs. Pay to Go The focus should be finding cost effective ways to motivate and encourage executives to build their careers at your organization. Rewarding executives based on performance and years of service are two drivers that can be incorporated into every executive retention plan. There are two ways to deliver value to an executive and reward them for their commitment and loyalty; cash and benefits. Delivery of cash with an accompanying vesting schedule and a predetermined payout can be extremely “sticky”. There can also be a non-compete incorporated into the plan design. Delivery of benefits based on years of service whereby the benefits are paid for 100% by the company and/or benefits can be structured to be portable to the executive are seen as extremely attractive. We will explore a Long Term Incentive Plan (LTIP) and other executive benefit plans that take into consideration both of these strategies. The goal is to put plans in place that are less costly than the economic impact of losing a key executive. Cash - Long Term Incentive Plan Establishing an LTlP can reduce the company’s explicit hiring and training costs by 50 percent. The true savings created by an LTlP becomes even greater when considering the implicit costs associated with losing an executive. The most impactful LTIP’s deliver both an immediate cash component and a deferred cash component. The immediate cash component is typically tied to a vesting schedule whereby a percentage of the LTlP benefits are delivered based on a vesting schedule (e.g., 1/3 vested a year, 100% vested in 3 years). A common percentage paid out over the vesting schedule is 50% of the total LTlP benefits. The remaining 50% that is deferred can be invested to earn a tax deferred rate of return and paid at a future point in time (e.g., 10 years, retirement age, etc.). It is this deferral component that creates the “golden handcuff” and is utilized to retain the executives in the long term. Below is a hypothetical graphical cost comparison of establishing an LTIP vs. incurring the costs of losing an executive. Long-Term Incentive Plan (LTIP)* Benefits - Split Dollar and Executive Long Term Care In addition to cash, there can be substantial value in providing executives and their families with valued benefits. The benefits provided would be in addition to traditional employee benefits. Two of the most popular benefits for executives are establishing a split dollar plan and an executive long term care plan. Both plans can be established without any P&L impact to the company while providing substantial cash benefits to the executives and their families. A split dollar plan is a structure that allows a company to provide tax free life insurance benefits to an executive with little cost being incurred by the executive. Moreover, based on years of service, a cash component can be designed into the plan at retirement age or after a certain period of time. It is important to note that the plan can be designed to recover 100% of the company’s costs. An “investment oriented” long term care insurance plan can provide executives with substantial tax free benefits in the event they lose two of five daily living activities. The premium is paid for by the company which creates a money market account on the balance sheet of the company. In the event the benefit is not utilized by the executive either because a) they didn’t meet the minimum number of years of service required to receive the benefit or b) they remain healthy, the company will be returned 100%+ of their premiums. Executive Summary The true cost of losing an executive equals the summation of the explicit and implicit costs that arise upon their departure, with the latter representing the most formidable costs, depending upon the quality of talent lost and the quality of the talent acquired. As Zappos CEO once remarked, poorly chosen hires have cost the company “well over $100 million” (6). It is clear that a company can be much better off creating ways to retain talent rather than taking on the risks of hiring new talent; the known usually outweighs the unknown. Companies across the country pay these costs every year for multiple executives which runs into the million of dollars. By way of example, a company with $1 billion in revenue, depending on the industry, will generally have about 250 executives that are considered highly compensated executive level employees. If the average salary is $180,000 and a company loses 5% of their executive team a year (i.e., approximately 12 executives out of 250), that equates to a total cost, conservatively, of about $4.3 million. Given the magnitude of this cost and potential damage on the enterprise value of the organization, it is important for companies to ask themselves two questions: What can we do to better retain our key people to effectively reduce executive turnover? Is the solution something that is less costly than the economic impact that is created when an executives leaves? Based on our experience in working with C-level talent and executive teams, it is important for a company to be proactive in understanding the cost formula: Pay to Stay < Pay to Go Exploring ways to reduce the impact of executive loss and, moreover, developing plans that preserve and enhance the long term enterprise value of the organization, should be an important part of every company’s strategic plan. Company Overview Mezrah Consulting (MC) is a national executive benefits and compensation consulting firm based in Tampa, Florida. Mezrah Consulting’s work is predominantly focused on executive benefits planning for sizable publicly traded and privately held companies. MC is a knowledge company offering its clients highly creative and innovative solutions. MC uncovers value and recognizes risks that other firms typically do not see. MC specializes in the design, funding, implementation, securitization and administration of non-qualified executive benefit programs. MC has been engaged in this consulting niche for over 25 years, advising companies in over 27 states and providing custom non-qualified plan administration on its proprietary cloud platform. For more information contact Lori Brink at (813) 367-1111 or lbrink@mezrahconsulting.com or learn more at MezrahConsulting.com. Download a PDF version of this article: The True Cost of Losing an Executive & the Best Ways of Structuring Plans to Retain Executives.