scottalaniz

Assume a NQDC participant works in a state with income taxes and retires to a tax-free state. She has two accounts within her deferred comp plan: a 10-year account, paying her $100k per year beginning in the year after retirement. The second account is a lump-sum account, paying out $50k in the year after retirement. She'll receive all the payments while residing in the no-tax state. My question...is there state income tax liability on the $50k lump sum from the source state? Instead of a lump sum, what if she had a 5-year installment of $50k per year. Would that be treated separately from the 10-year payment stream as well? Asked differently, is the 10-year rule interpreted to mean only specific accounts with at least a 10-year stream (or longer) within an employer's NQDC plan are taxed at the retirement state's income tax rate? Or, is the rule interpreted more broadly. Meaning as long as a combination of accounts within an employers' NQDC plan payout for 10 years or more, then all the payments are exempt from source state income taxation?

Thank you XTitan.

Specifically, how does one determine if a NQDC is a "restoration" plan. Must the plan type be explicitly stated in the plan documents? What specific language in the plan documents should I be looking for? For background, I manage investments for a number of Walmart Associates, some of whom defer salary and/or bonus in the employer plan. Thanks in advance. Scott