austin3515 Posted January 12, 2015 Posted January 12, 2015 Benefit in the Plan is a discretionary contribution each year, payable in 15 years. The amounts re not going to be separately invested in a brokerage account. The benefit is essentially tracked on a spreadsheet. Do I HAVE to pay interest? There is a rolling vesting schedule, so I think it is unfair that the participant will be paying payroll taxes on amounts that vest without even receiving the benefit of interest, but ultimately that is not up to me. I just need to know if it is possible to credit no interest. Austin Powers, CPA, QPA, ERPA
jpod Posted January 12, 2015 Posted January 12, 2015 Without an earnings component I wonder if it is even a defined contribution plan as opposed to a db plan for purposes of the 3121(v) rules. (I am not in a position to check that out now.) If it's a db plan then the amount subject to current FICA/Medicare is only the present value, if it subject to those taxes currently at all.
austin3515 Posted January 12, 2015 Author Posted January 12, 2015 Nonqualified Deferred Comp (perhaps you didn't notice which forum this is ). Austin Powers, CPA, QPA, ERPA
david rigby Posted January 12, 2015 Posted January 12, 2015 What does the plan say? If the plan is silent, consider recommending that the plan sponsor amend the plan to remove any doubt. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
austin3515 Posted January 12, 2015 Author Posted January 12, 2015 I'm drafting the Plan... Austin Powers, CPA, QPA, ERPA
Mark Whitelaw Posted January 13, 2015 Posted January 13, 2015 My background is NQ plan administration, not an attorney, but every NQ-DC plan document I've seen the past 25 years includes a crediting section. A link to external financial instruments or annually declared crediting rate specified by the plan sponsor ... which I would think could be 0% for your purposes.
mbozek Posted February 26, 2015 Posted February 26, 2015 I have never heard of a NQ DC plan that did not credit interest or gains on the contributions which built up the account balance. Purpose of a DC plan is to provide additional benefits to participants, not merely defer taxes on the contributions. Everyone has been aware of the fica tax on vested benefits in NQ plans for years. Have you discussed this question with the employer? mjb
QDROphile Posted February 26, 2015 Posted February 26, 2015 In a NQDC Plan, the benefit is what the plan says it is. There is no legal issue with the plan providing for no time value of money. The persons who are the participants are usually sophisticated enough and powerful enough to avoid being denied time value of money. Note that the IRS has expressed doubt that elective deferral and substantial risk of forfeiture can go together.
austin3515 Posted February 26, 2015 Author Posted February 26, 2015 Have you discussed this question with the employer? Now why in the world would I ask the employer how they want their own plan designed? That's a strange question... My 2 cents 1 Austin Powers, CPA, QPA, ERPA
mbozek Posted February 27, 2015 Posted February 27, 2015 Since you already know the answers to the questions that you deem to be important you don't need any further assistance. Good night and good luck. mjb
My 2 cents Posted February 27, 2015 Posted February 27, 2015 Have you discussed this question with the employer? Now why in the world would I ask the employer how they want their own plan designed? That's a strange question... LOL!! Always check with your actuary first!
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