Deferred Comp Question

[Texas Proud]

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....

 

[euro]

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.

 

[euro]

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-plan...re-eligible-for-more-than-one-retirement-plan

 

[kimcdougc]

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.