How Do Executive Non-Qualified Deferred Compensation Plans Work? скачать в хорошем качестве

How Do Executive Non-Qualified Deferred Compensation Plans Work?

Non-qualified deferred compensation plans (NQDC plans) give high-earning executives and employees a way to save more for retirement by delaying income taxes beyond what traditional accounts like 401(k)s allow. But how do these deferred compensation plans actually work, and what risks should you know about before enrolling? In this video, we break down: What an NQDC plan is and how it works When you have to make your deferred compensation election Tax rules and implications under Section 409A Distribution options—lump sum vs. installments Key risks like employer insolvency and limited flexibility How a non qualified retirement plan can fit into your overall strategy Whether you’re researching deferred comp options, comparing nonqualified deferred compensation plans, or deciding if this type of plan makes sense for your financial goals, this video will help you understand the opportunities and potential pitfalls. Questions or want to schedule a consult? Phone: 518-477-6686 Contact Us Page: https://www.greenbushfinancial.com/co... Visit our website: https://www.greenbushfinancial.com/ Subscribe to our channel for more financial planning tips:    / @greenbushfinancialgroup   Leave a comment below! 🔔 Stay Updated If you found this video helpful, please like, comment, and subscribe! Don’t forget to hit the bell icon for notifications on new uploads. 00:00 Non-Qualified Deferred Comp Plan 01:04 Who is Eligible for an NQDC Plan 01:29 Benefit of NQDC Plans 01:48 How are Contributions Structured for Non-Qualified Deferred Comp Plans 02:59 Mistakes Made With NQDC Plans 03:41 Important Considerations 04:26 How are NQDC Plans Taxed? 05:30 Is an NQDC Plan Right For You? Frequently Asked Questions (FAQs): What is a Non-Qualified Deferred Compensation (NQDC) plan? A Non-Qualified Deferred Compensation (NQDC) plan is an employer-sponsored arrangement that allows select employees—typically executives or highly compensated individuals—to defer a portion of their income to a future date, such as retirement or separation from service. These plans are not subject to the same IRS limits as 401(k)s. How does an NQDC plan work? Participants elect in advance to defer a portion of their salary, bonuses, or other compensation before it is earned. The deferred income grows tax-deferred until distributed, usually at retirement or another specified event. Because the funds technically remain part of the employer’s assets, they are not taxed until paid out to the employee. When do I have to make my deferral election? Under IRS Section 409A, deferral elections must be made before the start of the year in which the income is earned. These elections are generally irrevocable for that year and must follow strict timing and compliance rules to avoid penalties. How are NQDC distributions paid? Participants usually choose a distribution schedule when enrolling in the plan. Common options include a lump sum at retirement or installment payments over 5–10 years. Once the schedule is selected, it’s difficult to change without a five-year delay and compliance with Section 409A regulations. How is deferred compensation taxed? Deferred income and its growth are not taxed until distributed. When payouts occur, the amounts are taxed as ordinary income—not capital gains. However, if the plan violates 409A rules, deferred amounts could become immediately taxable with additional penalties. Are NQDC plans protected from creditors? No. Unlike 401(k)s, NQDC plan assets remain part of the employer’s general assets until distributed. This means that if the company faces bankruptcy or insolvency, participants may lose their deferred compensation. What are the main risks of participating in an NQDC plan? The key risks include employer insolvency, lack of liquidity, and limited flexibility. Because plans are often unfunded and cannot be accessed early without tax penalties, participants rely on their employer’s financial strength and long-term stability. Who should consider using an NQDC plan? These plans are best suited for high earners who have already maxed out qualified retirement plans, expect to stay with their employer long-term, and anticipate being in a lower tax bracket in retirement. They may also be attractive for executives at financially stable companies. Who might want to avoid an NQDC plan? NQDC plans may not be appropriate for individuals who expect to leave their employer soon, need short-term access to funds, or are concerned about the company’s financial health. Those uncertain about their future tax situation should also evaluate carefully before deferring large amounts.