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NQ plan distribution - use for qualified plan

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An individual is receiving some large NQ plan distributions for the next several years and is looking for a way to avoid some of the taxes.  He could not use those payouts as a basis to establish a solo 401k plan for himself and defer into the plan on a tax deferred basis could he?  I'm pretty sure the answer is no, but just checking around for him.


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NQ plan distributions from an employer for which he continues to work? If plan permits he could defer receipt of payments not due within the next 12 months, providing such complies with 409A. This is compensation to him, not self-employment income for which he could do a solo plan - unless he was not an employee but a contractor service provider (then and now) with deferred compensation from the service recipient.


Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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A self-employment job?  Another job? 

Money is fungible.  If he uses the cash from his NQ payment to fund his IRA, that is not a problem as long as his total IRA contribution falls within any applicable limit.

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.

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