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415M NQ plan distribution questions

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  • 415M NQ plan distribution questions

    I am changing employers and required to close out my 415M Non qualified plan with a lump sum distribution. Unfortunately timing is not ideal as it is down about 20% since I opened the account. I will also need to pay taxes on this as I cannot roll over into new retirement account and will be taxed as regular income. Does anyone have a similar experience or any advice on how best to handle this? The distribution is over $50k and I was planning to re invest in my taxable account in similar funds. Hopefully I can tax loss harvest some of it, but unsure since it is treated like deferred income it seems like. Appreciate any advice you can provide.

  • #2
    That's the downside of participating in these types of plans. At least you won't pay taxes on the appreciated amount (if it was up by 20% for example). The main point is that you want to lower your taxes, not increase them, so ideally the distribution happens in retirement, but that's not the reality. Ideally you want to elect a longer distribution period (I've seen 5-10 years) if that's allowed. If you have to distribute assets immediately on changing jobs, that's probably not a plan I would participate in as you might end up paying more taxes if you end in higher brackets as a result of a large distribution.
    Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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