One Time Election to Change Distribution Date

[Guest MAGi]

Is there a ruling applicable to NQDC of non-governmental, taxable employers that allows participants to make a one time election to defer receipt of distributions beyond the date of original distribution? I know that 457 plans have this feature.

PLEASE HELP!!!

Thanks!

[Guest Harry O]

The IRS will approve so-called "second elections" only if at the time the new election is made the deferred compensation is subject to a substantial risk of forfeiture (e.g., employee loses benefit if he terminates prior to age 55). If the deferred compensation is already earned and "vested," the IRS's position is that a second election is ineffective.

However, as always, there are two sides to every coin. There is some case law supporting second elections. Many practioners are comfortable that second elections made in the calendar year prior to the year of originally scheduled payment are effective. This is particularly true if the amount of the deferred compensation ultimately payable to the employee is not ascertainable at the time the second election is made.

Get some help from a competent tax attorney familiar with nonqualified deferred compensation.