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Executive decides not to retire at 65?


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Existing unfunded NQ deferred com plan provides that at age 65 the executive is fully vested and that within 30 days after age 65 payments will begin either in lump sum or by purchasing an annuity contract with the plan reserve book amount.

Executive turns age 65 in two weeks. He has decided to continue working and not retire yet. The client wants to:

1) extend the NQ deferred comp plan to continue to credit to the book reserve the same percent of profits as in the past while executive continues to work past age 65

2) what options are available with the payout of the current vested balance?

Would this executive have had to make an election to defer payment past age 65 at least 12 months before turning age 65? Since he is within 2 weeks of being eligible for payment is he out of luck in deferring any further?

What about if an annuity contract is purchased? I assume that because he could have chosen the lump sum he would be taxed as a lump sum at the time the annuity is purchased.

Could an installment payment option directly from the employer be added so that executive would only be taxed as amounts are received.

As he will continue working, he has no need for the income at this point.

Thank you for any comments.

DMH

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  • 2 weeks later...

There is at least one court decision that allowed an executive to elect to defer distributions that were to commence within about 2 months of the date that he made his election. Critical to the conclusion was the fact that it was not a corporation controlled by this employee. I can't remember the citation, but the decision was released about 10 years ago. I would research under the 12 month rule and you will probably turn it over.

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