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Robert A. Imparato, Jr CFP®
CERTIFIED FINANCIAL PLANNER™ professional
Craig A. Hyldahl CFP®
CERTIFIED FINANCIAL PLANNER™ professional
R.I.C.H. Planning Group, LLC
105 Fieldcrest Avenue, Suite #507
Edison, NJ 08837
Robert: 732-326-5240
Craig: 732-326-5240
Fax: 732-326-5331
Robert: robert@richplanninggroup.com
Craig: craig@richplanninggroup.com
Website: www.richplanninggroup.com
July/August 2024
Nonqualified Deferred Compensation Plans Explained
Many employers consider nonqualified deferred compensation (NQDC) plans crucial in attracting and retaining top talent, with 58% offering these plans to key employees who can afford to invest more after maxing out their 401(k).
The Nonqualified Difference
Unlike a 401(k) plan, an NQDC plan doesn’t have to meet Employee Retirement Income Security Act requirements, such as an annual contribution cap, age restrictions on withdrawals, and required minimum distributions. You gain greater flexibility and more options. The tradeoff is that NQDC plans carry additional risk.With an NQDC plan, you determine how much earned income to defer each year and schedule when to receive your deferred income. You might select a lumpsum distribution or installments starting at a particular date. You could have income distributed to meet financial goals or choose to wait until retirement.
Investing Contributions
Contributions aren’t invested directly. Instead, you designate investment choices for bookkeeping purposes. Your employer uses your choices as a benchmark to calculate the appropriate investment returns owed during the deferral period. Your employer will distribute your deferred income to you later, along with the investment growth you would have earned.Tax Advantages
As with other deferred compensation plans, you defer current income tax on your contributions and any plan growth until they’re distributed. You reduce your current taxable income and can schedule your distributions to arrive in lower tax bracket years.Detractions
You could suffer a complete loss if your company encounters financial hardship and may possibly have to forfeit your deferred income if you leave your employer before the distribution date. That distribution date can be difficult to change after it’s been set. Also, you can’t borrow from NQDC plans or roll distributions into an IRA or other tax-deferred retirement vehicle.Having your legal, tax and financial professionals review your plan’s agreement and financial situation can help you decide whether to go with your NQDC plan.
GE-6407076.1 (2/24) (Exp 2/26)
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Duly registered and licensed financial professionals offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN), offer investment advisory products and services through Equitable Advisors, LLC, an SEC-registered investment advisor, and offer annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc.). Equal Opportunity Employer - M/F/D/V. Equitable Advisors and its associates and affiliates do not provide tax, accounting, or legal advice or services.
R.I.C.H. Planning Group, LLC is not owned or operated by Equitable Advisors or Equitable Network. GE-6572038.1 (4/24)(Exp. 4/26)
CFP® and CERTIFIED FINANCIAL PLANNER™ are certification marks owned by the Certified Financial Planner Board of Standards, Inc.
These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.
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