Non def comp plan
I have a client who left a bank and had a non-qual def comp plan there. He is still working and is 70 yrs old.
What are his options?
I’ve been told that he can roll into his new employers non qual def comp plan.
I guess he couldnt roll it to a brokerage acct/non qual def comp plan because he is not set up as a sole propertier since hes taken a new job with a bank.
Permalink Submitted by mk foss on Sun, 2008-10-26 23:24
Because it is a nonqualified deferred compensation plan, it cannot be rolled over to an IRA or to any “qualified” deferred compensation plan. His options are ordinarily dictated by the contract or plan that controls this particular plan.
I have not heard of any nonqualified plans that will accept funds from the nonqualified deferred compensation plan of another employer. I’m afraid his options are severly limited.
Permalink Submitted by Al Fry on Mon, 2008-10-27 03:22
What is it funded with? I have heard of plans being transferred from one corp to another when funded with life insurance IF he is an officer or shareholder.
Permalink Submitted by BruceM on Mon, 2008-10-27 06:12
Deferred comp may be funded or unfunded. If the former, there must be a written plan that defines a substantial risk of forfeiture…usually to a future date, but often with non-compete provisions. It is unlikely this would be transferrable to another employer.
If unfunded (Rabbi Trust), this is simply the employer’s promise to pay at some future date, usually a % of the plan’s value per year. This must show up on the employer’s balance sheet as an asset available to company creditors, and could be transferrable to another employer, although I’m not sure why he’d want to. To avoid taxation of the realized gains over the years, the employer may informally fund the trust with cash value life insurance, although there are currently some disincentives for doing this (increase in cash value above premiums paid may be AMT income to employer owned LI)
BruceM
Permalink Submitted by Al Fry on Mon, 2008-10-27 13:26
Sorry, I meant “informally funded”. It can be informally funded with or without a rabbi trust.