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Richard Weiner
Financial Advisor
Tropical Financial Investment and Insurance Services
Located at Tropical Financial Credit Union
3050 Corporate Way
Miramar, FL 33025
Phone: 954-517-7738
Cell: 954-401-9548
Email: richard.weiner@lpl.com
July/August 2024
Nonqualified Deferred Compensation Plans Explained
Many employers consider nonqualified deferred compensation (NQDC) plans crucial in attracting and retaining top talent, with 58% offering these plans to key employees who can afford to invest more after maxing out their 401(k).
The Nonqualified Difference
Unlike a 401(k) plan, an NQDC plan doesn’t have to meet Employee Retirement Income Security Act requirements, such as an annual contribution cap, age restrictions on withdrawals, and required minimum distributions. You gain greater flexibility and more options. The tradeoff is that NQDC plans carry additional risk.With an NQDC plan, you determine how much earned income to defer each year and schedule when to receive your deferred income. You might select a lumpsum distribution or installments starting at a particular date. You could have income distributed to meet financial goals or choose to wait until retirement.
Investing Contributions
Contributions aren’t invested directly. Instead, you designate investment choices for bookkeeping purposes. Your employer uses your choices as a benchmark to calculate the appropriate investment returns owed during the deferral period. Your employer will distribute your deferred income to you later, along with the investment growth you would have earned.Tax Advantages
As with other deferred compensation plans, you defer current income tax on your contributions and any plan growth until they’re distributed. You reduce your current taxable income and can schedule your distributions to arrive in lower tax bracket years.Detractions
You could suffer a complete loss if your company encounters financial hardship and may possibly have to forfeit your deferred income if you leave your employer before the distribution date. That distribution date can be difficult to change after it’s been set. Also, you can’t borrow from NQDC plans or roll distributions into an IRA or other tax-deferred retirement vehicle.Having your legal, tax and financial professionals review your plan’s agreement and financial situation can help you decide whether to go with your NQDC plan.
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Richard Weiner is a financial advisor with, and securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Tropical Financial Credit Union and Tropical Financial Investment and Insurance Services are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Tropical Financial Investment and Insurance Services, and may also be employees of Tropical Financial Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of, Tropical Financial Credit Union or Tropical Financial Investment and Insurance Services. Securities and insurance offered through LPL or its affiliates are:
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