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Old 06-18-2017, 08:01 AM   #21
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Originally Posted by capjak View Post

Can we save the tax hit in anyway? We are at 33% tax rate this year.
Talk to a CPA but I think you're stuck with the hickey.

Hey the good news is that you probably already paid FICA.
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Old 06-18-2017, 08:02 AM   #22
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Originally Posted by fosterscik View Post
Interesting. I worked for a state agency and deferred salary through a 457 plan. My plan explicitly states that the deferred compensation can be rolled into an IRA after separating from service. I haven't done so yet, but will in the next month or so. Hopefully it will be straightforward.

It doesn't seem fair that private deferred comp plans ban transfers to an IRA when my state sponsored plan allows it. Frankly without this privilege I would have saved extra after-tax money because I've never been in a high Federal tax bracket. My main motivation was to avoid paying state income tax (IRA income is not taxed by my state).
457 is tax-qualified. I'm pretty sure the OPs plan is nonqual.
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Old 06-18-2017, 08:11 AM   #23
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457 plans are the government equivalent to the 401k retirement plans in the private sector. They are IRS sanctioned retirement savings plans (with strictly regulated contribution limits). Deferred Compensation" plans are company sponsored vehicles that go beyond the contribution limits of the 401k. I'm not sure on the details, but I strongly suspect the sponsoring company has to compensate the IRS somehow for the "deferred income" in these accounts. Bottom line is though that they can't be rolled into IRAs because that would essentially mean unlimited IRA contributions (as opposed to the $6500 or $24000 for normal IRA or 401k/457 plans for those over 50 years of age). Anyway, Uncle Sam tends to find a way.....
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Old 06-18-2017, 08:15 AM   #24
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Hey the good news is that you probably already paid FICA.
I THINK (and hope) that's true, but I'm not 100% sure - I'll know for sure next year when I get my first payout.
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Old 06-18-2017, 08:41 AM   #25
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457 plans are the government equivalent to the 401k retirement plans in the private sector. They are IRS sanctioned retirement savings plans (with strictly regulated contribution limits). Deferred Compensation" plans are company sponsored vehicles that go beyond the contribution limits of the 401k. I'm not sure on the details, but I strongly suspect the sponsoring company has to compensate the IRS somehow for the "deferred income" in these accounts. Bottom line is though that they can't be rolled into IRAs because that would essentially mean unlimited IRA contributions (as opposed to the $6500 or $24000 for normal IRA or 401k/457 plans for those over 50 years of age). Anyway, Uncle Sam tends to find a way.....
It's not quite that simple. I had a 403b plan as my retirement account which i considered to be my 401K equivalent (my state employer required I put in a percentage of my salary; they added a fixed % of my salary each month). The 457 plan was available as an optional deferred salary plan "extra" that "went beyond" the 401k/403b limits. I contributed the $24k max each year to my 457 in addition to my 403b contributions.
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Old 06-18-2017, 09:44 AM   #26
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It's not quite that simple. I had a 403b plan as my retirement account which i considered to be my 401K equivalent (my state employer required I put in a percentage of my salary; they added a fixed % of my salary each month). The 457 plan was available as an optional deferred salary plan "extra" that "went beyond" the 401k/403b limits. I contributed the $24k max each year to my 457 in addition to my 403b contributions.

The plan of the OP is not tax advantaged like an IRA/401(k)/403b/etc... the only thing it does is delay the year you have to recognize ordinary income... there is NO rolling it over, period.


When I worked at mega, some of the top execs would put in millions (yes, millions) of dollars so they would not have to pay current taxes...

I remember my boss talking about it since somehow she qualified one year and once she was in she always had the option even though she never qualified again.... and from what I remember it was their bonus that they had the option of putting in the plan, not their normal salary... but a to exec can have a salary of say $750,000 but get a $10 million bonus.... with 30% to 50% in 'cash'...

The thing you have to remember is that the 'plan' is owned by the company and is basically a promise to pay... if the company goes into BK the plan is an asset just like all other assets... you do have a possibility of losing which you do not have with the 401(k)/403(b) as that money is being held by someone else....
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Old 06-18-2017, 11:53 AM   #27
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The plan of the OP is not tax advantaged like an IRA/401(k)/403b/etc... the only thing it does is delay the year you have to recognize ordinary income... there is NO rolling it over, period.


When I worked at mega, some of the top execs would put in millions (yes, millions) of dollars so they would not have to pay current taxes...

I remember my boss talking about it since somehow she qualified one year and once she was in she always had the option even though she never qualified again.... and from what I remember it was their bonus that they had the option of putting in the plan, not their normal salary... but a to exec can have a salary of say $750,000 but get a $10 million bonus.... with 30% to 50% in 'cash'...

The thing you have to remember is that the 'plan' is owned by the company and is basically a promise to pay... if the company goes into BK the plan is an asset just like all other assets... you do have a possibility of losing which you do not have with the 401(k)/403(b) as that money is being held by someone else....
That!

As to whether regular pay or bonus can be contributed depends on the specific plan/company. My mega allowed deferring both. Correct though on the "promise to pay" angle. And, the way OP described almost certainly NOT tax-advantaged.
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Old 06-18-2017, 12:03 PM   #28
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Originally Posted by fosterscik View Post
It's not quite that simple. I had a 403b plan as my retirement account which i considered to be my 401K equivalent (my state employer required I put in a percentage of my salary; they added a fixed % of my salary each month). The 457 plan was available as an optional deferred salary plan "extra" that "went beyond" the 401k/403b limits. I contributed the $24k max each year to my 457 in addition to my 403b contributions.
Yes, I think you are right - if you qualify for BOTH, a 401k/403b/etc type AND a 457 plan, then you can basically defer double the max (up to 24k each plus some special "15y make-up" on top of that), but if you have only one or the other then the max is 24k give or take.
The comp deferral plan the OP likely speaks of typically has no upper limit (other than actual salary), but again, is NOT tax-privileged other than tax on both, contributions and gains are deferred until payout. These tend to be reserved as "executive benefits" and I suspect that there is an arrangement of some sort between Uncle Sam and the company in order to make up for the lost tax revenues. That's just a guess though - I have no specific knowledge.


https://www.irs.gov/retirement-plans...etirement-plan
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Old 06-18-2017, 04:29 PM   #29
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When we retired in 2015, we took out enough $ from our 401K to live on for 5 or 6 years. We did an NUA and had to write a BIG check to Uncle Sam. Forward 2 1/2 years later, we haven't had to pay anything in taxes because DH pension leaves us in the poverty level. Shouldn't have to pay anything for the next years or so as we live off of our cash. Then we will just be doing some rollovers to our Roth's at the 15% tax rate.

We paid up front but are new reaping the no taxes owed to the IRS. Hurt when I wrote the check...but much better years later.
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