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Employer's Discretion of Nonqualified Plan payout: Constructive Recei


Guest kp

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Employer's nonqualified plan states that distribution occurs upon termination of employment (plan says no termination if transfer to subsidiary). Plan also gives discretion to Plan Administrator to vary manner and timing of distribution. Plan participant transfers to sub and employer wants to payout the small balance. Constructive receipt issue? Taxes will be paid at time of distribution. It is the employer's wish to payout, not the participant's.

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Guest Harry O

Absolutely not. Compensation is constructively received only if the *employee* has unfettered control in determining when the compensation will be paid. However, if the employee's control of the funds is subject to substantial limitations or restrictions imposed by someone other than the employee, such as the employer, there will be no constructive receipt.

Query whether the employer can contractually pay this amount. Most plans give the employer discretion as to the manner of distribution only when the employee's entitlement to money is otherwise triggered -- termination of employment in this case. I suspect that as a practical matter the employer will stuff the money down the employee's throat and, although the employee may not like it and it may contravene the terms of the plan, the employee will simply go along in light of the small dollars involved.

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Guest KLSusac

I don't believe you have a constructive receipt issue here because as you have pointed out if distribution is made there will be actual receipt and the amounts are immediately taxed. The bigger issue is why a distribution is going to occur at all. If the document says the benefit is payable at termination and the employee is not terminating under the terms of the plan,under what authority is the employer paying out?? Typically the administrator has authority to change distribution methods but not whether to pay out or not.

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KLSusac

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  • 2 weeks later...
Guest bswift

vincent - these plans typically give the plan administrator the discretion to distribute assets from the plan before the employee is otherwise entitled to a distribution. as in the above post it is important that the pa and not the employee have this discretion under section 451. if the discretion exists, you could request that the benefit be distributed early. one other thing to think about is that alot of these plans allow distributions in the event of a "hardship". check to see if that plan does allow for this type of distribution and see if you fall within one of the hardship categories. good luck.

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Guest Vincent Monahan

Having an "unfunded,nonqualified deferred compensation" with a major bank in NYC,which I am to receive over a 15 year period,@ age 59 and a half, I am currently 53, because of medical reasons, do I have any way of borrowing, withdawing from this plan now. There is a "Plan Administrative Committee" made up of 6 executives, including an ex family member. I am trying to go in the back door. Thank you for your time and effort.

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Guest Vincent Monahan

Thank you "bswift" for the information, after reading the "Plan", I have come across a number of ERISA Sections such as 201(2), and a few others, I have tried to Search ERISA trying to locate these Sections, any ideas on how I can locate them.Thank you again for your time and effort.

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[This message has been edited by Vincent Monahan (edited 03-25-99).]

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