Set card in the Deferred Compensation Plan

Aug 6th, 2022
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How to set card in the Deferred Compensation Plan

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good morning everybody it is Jeanie Fisher a certified financial planner and senior foreign key adviser with our key and I talked a lot about qualified plans ERISA plans but today were going to talk about the non-qualified deferred compensation plan now this is not an ERISA plan and because of that it is not subject to ERISA standards and that really carries two primary benefits for the employer they are now allowed to actually discriminate on who they offer the plan to so they dont have to necessarily provide it to every employee on the employee side the IRC contribution limits are not there so you can actually defer a much larger portion of your income so lets walk through how this works for lets say an executive youre earning $300,000 a year you know you need to save money for retirement or long term goals you max out your 401k or your qualified plan but youve hit that limit pretty quickly right the 19,000 or the 25,000 if youre over the age 50 but in order for you to meet yo

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An employer will offer you the opportunity to defer a portion of your compensation for several years. Doing so defers taxes on any earnings until you withdraw. Examples include pensions, retirement plans, and stock options.
Deferring compensation reduces your current year tax burden, which is valuable for high income earners in top tax brackets. Recognizing deferred compensation income at lower tax brackets when youre retired can save you money on taxes. Choosing to defer income is very difficult to reverse if your circumstances change.
Federal income tax is also delayed when you defer income, but you do pay Social Security and Medicare taxes. A deferred comp plan is most beneficial when you can reduce your present and future tax rates by deferring your income. Unfortunately, its challenging to project future tax rates.
Disadvantages of Deferred Compensation With a deferred compensation plan, you are effectively a creditor of the company, lending the company the salary you have deferred. If the company declares bankruptcy in the future, you can lose some or all of this money.
Deferred compensation plans are funded informally. Theres essentially a promise from the employer to pay the deferred funds, plus any investment earnings, to the employee at the time specified. In contrast, with a 401(k), a formally established account exists.
You should contribute as much as you can afford to put away for retirement, because every extra dollar you save will have an enormous impact over the long term. Say you are 30 years old and contribute $100 biweekly into your account. At age 60, if you earned 8% on your investment, you would have $306,620.
You can process a distribution request by logging in to your account and navigating to Loans Withdrawals Taking a Withdrawal Request a Withdrawal. If you have questions about distributions, call the Service Center at 844-523-2457.
The tax law requires the plan to be in writing; the plan document(s) to specify the amount to be paid, the payment schedule, and the triggering event that will result in payment; and for the employee to make an irrevocable election to defer compensation before the year in which the compensation is earned.

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