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Non-qualified deferred compensation plan, thoughts?

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  • Non-qualified deferred compensation plan, thoughts?

    My group was recently taken over by one of the big EM groups. Im predominantly w2.  Currently, I max out my 401K with match (ends up at 24k/year), his and hers backdoor roth iras. I also have some 1099 income and am able to put close to 20K/year into my solo 401k. I also put a significant amount into a taxable account (roughly 150k/year).

    Our new group allows us to defer up to 50k of our income each year on a pre-federal/state income tax level (but post FICA and medicare). This seems like a pretty good gig, but the biggest caveat is if the group goes bankrupt then we have the potential to lose some or all of our DCP.  Its essentially a promise that they will pay us the money later.  So in addition to the typical risks associated with stock market investments, we have group insolvency risk. They also wont let us roll this over into a 401k/IRA, if we leave the group we have to start taking distributions

    I currently make about 450K.  Would you guys contribute the max 50k to this, part of the 50K, or just skip it all together?


    Thanks in advance.

  • #2
    Basically my biggest worry is that the company goes bankrupt and I lose all my investments, although I suppose that's unlikely


    • #3
      In a similar boat, decided not to do it bc of worry of leaving group early and having to take distributions all at once while in a high tax bracket. If you do it make sure you know what your options are re: distributions at termination.


      • #4
        We have the same deal at my company.  I don't have the same worries of going under.  We are allowed to save up to 50% of our salary minus any 401K, HSA, FSA contributions.  I'm considering for two reasons.  1 - depending on the tax shake out and lack of deductions in CA (I own my home), I'm going to get buried so if I can get into a lower bracket or two I'm going to do it.  2 - I've been to the school of PT Barnum and have a number and at the point of being just about even with my WF policies.  I'm thinking about cashing them out, using the proceeds to offset what I would invest in this vehicle.  We have a number of low fee ML options including a guaranteed income that is set at 4.5% for 2018.


        • #5
          Also, look at other restrictions. Our organization (hospital) offers a 457(f). When initially offered a few years ago, there were substantial risks of forfeiture related to continued medical practice after termination of hospital employment. Unless you were completely retired, with no medical practice income, there was a requirement to remain on the active medical staff and continue to provide ER call coverage for three more years. I think they've since backed off of some of the nonsense. Point is, carefully review the rules related to your plan before committing the money.


          • #6
            I invested in my SERP while working for TeamHealth and am glad I did. I felt the chance of them going toes up was pretty small, the plan had low cost options with Vanguard funds held at Schwab. In retrospect I wish I had not setup the withdrawal phase the way I did to allow for some higher Roth conversions before RMDs kick in, but overall am satisfied.