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Employer has an NQDC plan in the form of "appreciation units." Executive wants any payments under the plan to be paid to a trust, of which he and his wife are the trustees, instead of to him directly. My understanding is this does not avoid taxation for him, but he wants the trust to hold all of his assets. Plan currently does not permit the assignment of rights under the plan. My question is this: Does amending the plan to allow a participant to assign his/her right to payment to a trust present problems under 409A? Any right to payment is still subject to forfeiture. Any thoughts on this would be much appreciated.
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I am confident that nonqualified top hat plans will need to address the final rule, specifically when disability is a payment trigger; however, is the rule applicable if disability only accelerates vesting and is not a payment trigger? Would seem so, but I'm not certain. What if the plan only contains disability respective to the cancellation of a deferral election? Would the rule apply here as well? Thoughts are greatly appreciated. Thanks!
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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?
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