Unlinking Nonqualified Plan from Qualified Plan

[Guest gaham]

I have 2 NQDC plans which for reasons I won't go into here will need to be aggregated at least in part with each other. One offsets the benefit it provides by employer contributions to the 401(k) qualified plan, the other permits elective deferrals and matching contributions in excess of the 401(k) qualified plan limits. Because I am concerned about the limitations imposed on linked plans, I want to "unlink" these nonqual. plans from the 401(k) plan. I believe I can do this by: (i) requiring that deferral elections under the NQDC plan be made prior to the beginning of the year and be irrevocable for that year while at the same time assuming that the each participant will make the max contribution he can under the 401(k), and (ii) not recognizing any changes that a participant actually makes in the 401(k) plan during the year for purposes of calculating deferral amounts in the NQDC plans. Since no change that the participant makes under the 401(k) plan during the year will affect the amount deferred for him under the NQDC plans, I think this strategy works. However, I would appreciate any other opinions, or contrary views. Anyone?

[Steelerfan]

I've discussed similar strategies, I think your ideas work but the limitation that I see with that design is that you need to make 2 deferral elections. Depending on how your match (if you have one) is structured, since the NQDC plan can't accept deferrals until the 401(k) limit is reached, participants could end up losing out on match money in order to fill up the 401(k) faster. I haven't found any perfect solutions to this, that's why I think 409A is a bigger impediment to linked plans than others on the board have acknowledged. If a participant could only adjust their NQDC deferral percentages throughout out the year, these issues could be resolved (obviously that will never happen).