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Distributions : Payout Basics
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Opportunities And Risks: The Role Of Nonqualified Deferred Compensation In Your Financial Planning (Part 2)
by John Lawson

Your company’s nonqualified deferred compensation (NQDC) plan can provide you with the wealth to meet many of your financial goals, including a comfortable retirement. However, participation is not simple, and the choices you must make can seem confusing. Part 1 introduced NQDC, the basic features of NQDC plans, and some primary financial-planning concepts. Part 2 explores the tax deferral that makes NQDC so attractive, and then discusses the restrictions on liquidity and distributions.

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More Articles:
UPDATES! The Terms Of Your Company’s NQDC Plan: What You Can Expect (Part 2)
UPDATES! Job Loss: How It Affects Your Nonqualified Deferred Compensation
NQDC Distributions: Learn The Rules Before It’s Too Late
FAQs
If I am not certain about when I should take my distributions, when should I elect to receive them?

You want to match the distributions with your goals, along with watching for any limits imposed by your plan on taking distributions. You may want…

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UPDATES! What if I have a financial or medical hardship? Can I get a distribution?

It’snot so simple. This is another situation controlled by the 409A rules on “unforeseen emergencies” that relate to hardship withdrawals. The definition covers…

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More FAQs:
Can I get a distribution in stock?
Can my distribution be linked to a formula?
Can I elect a different timing for just a part of my already scheduled future distributions, or must my subsequent deferrals all be treated the same?
Can I get a distribution at any time and just take a “haircut” on it by paying a penalty to my company, or is that only for grandfathered plans?
Can I accelerate my distributions to withdraw the money earlier?
If the distribution is not made at the exact time specified in the plan, how much earlier or later than the scheduled distribution date can I receive the payment without being penalized?
Can I change the timing or form for just part of my scheduled distribution, or even just one installment payment?
Are the rules different if I change the timing of an installment distribution?
How do I change the timing or form of my distribution?
UPDATES! At distribution, will I receive a lump sum of cash, or will I get installment payments over a number of years?
Do I need to reach a certain age to receive distributions? Is there a particular age when I must start receiving distributions?
Can I get distributions of my deferred compensation whenever I want?
Are the taxes I owe at distribution based on the value of the amount I deferred at the start or on the value of the distribution I receive?
Do I have to pay federal unemployment tax (FUTA) on my NQDC distributions?
Will I owe any income taxes when I elect to participate, when my income is deferred, or when I receive distributions?
Can I easily postpone or accelerate distributions?
Do I need to defer all of the distributions to the same year?
Do I need to elect the percentage I defer, the year when it will be distributed, and the form of payment when it is distributed?
Is there a difference between triggering a distribution and accelerating it?
What is an in-service distribution?
NEW! Can personal creditors reach or garnish my nonqualified deferred compensation distributions?
Quiz
Basics of NQDC
Know the fundamentals? Find out with our short quiz on core concepts.
Distributions
Check your knowledge of key rules that affect payouts.
Podcasts
Core Concepts Part 1
Core Concepts Part 2

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