Disability Payment Linked to Insured Disability Benefits Ending

[Guest Alley]

A client has a nonqualified defined benefit plan that provides a disability payment. Presently, it is drafted with the 409A definition of disability, but also requiring a separation from service for payments to begin. They want to provide that the disability payments will not begin until such time as disability benefits (if any) provided under the employer's insurance disability plan cease. Otherwise, the nonqualified plan will pay a reduced benefit to the participant (because of payments beginning prior to normal retirement age) and the disability plan will reduce the amount paid under that plan to account for th receipt of the nonqualified plan payments.

I have concerns that this payment provision will not meet the objectively determinable time of payment requirement. Does anyone have any thoughts on this?