non-qualified deferred comp- how to transfer?
I have a 52 year old client with over 450k in what he terms as a non-qualified deferred compensation plan. He wants to consider leaving his employer and is 100% vested. The plan administrator told him that he cannot “roll over,” this plan without getting with with taxes all at once. What are his options with this type of plan? [u]Can he do a trustee to trustee transfer to an IRA upon separation of employment and continue to defer the tax?[/u]
Permalink Submitted by Al Fry on Tue, 2008-10-14 18:13
No. NCDC plans are not eligible for rollover or transfer to an IRA. The only DC plans that are eligible are 457(b) Governmentals, which seem to be “quasi-qualified”. Perhaps he could convince the company to use his money to purchase an annuity with some guarantees, along with upside potential. They would have to own it.
Permalink Submitted by WILLIAM Czerkies on Tue, 2008-10-14 19:19
If he can convince the company to purchase an annuity and the company is the owner, and he is no longer employed there, how does this benefit him? What is the downside of making the company the owner?
Permalink Submitted by Al Fry on Tue, 2008-10-14 23:57
A NQDC agreement normally calls for the company to make payments to him when he severs service if he is vested. Most more recent plans are defined contrubution, which, without any guarantees would be subject to the investment results of the underlying asset. If they transfer it to him, he’ll be taxed on the entire amount in one year.