A Year to Plan

Once an executive is less than 12 months away from a non-qualified plan benefit distribution there is nothing they can do to change the payment event. This is a part of the provisions of IRC 409A. Rather than viewing this as a restriction of inconvenience the executive could use this year long period as a time for financial planning. They will know about how much they will receive and when it will be received.

We have seen a shift in the 401(k) industry after years of focus on asset accumulation. Now the focus has shifted to how individuals can make those accumulated dollars last for a long time into retirement. This created new products and financial strategies.

Perhaps it is time to start looking at the options for executives receiving non-qualified plan distributions. There are many tax advantaged products and strategies readily available today. They include 529 College Savings Plans for Grandchildren, Annuities, Life Insurance and Long Term Care. There is nothing we can do to avoid taxation on current distributions but it may make sense to look at ways to minimize tax going forward. All of these products offer some form of tax advantage.

NQnext will focus on Long Term Care and Life Insurance because it is important to get these in place while still healthy. 529 Plans and Annuities are not health sensitive therefore the urgency is not as great. With a year to plan I hope people will make the most of it.

Something to think about.

Doug Marshall

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