Reply to My co offered me a ‘supplemental savings program’ through our 401k. It is a way to defer comp and bonus, but says it

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Reply to "My co offered me a ‘supplemental savings program’ through our 401k. It is a way to defer comp and bonus, but says it "

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[quote=Anonymous]I participated in one when I was designated an HCE and was limited to a 6% contribution limit on my 401k.   I choose not to participate the first couple of years but then decided to.

My deferred comp plan worked as follows;

Up to 15% of total comp could be put in annually.
Plan had a guaranteed rate of return of 7%.  Readjusted up and down once a year but it generally floated around 6 to 7%.  No option to direct within the plan, it just went into a “fund” that grew by 7%.
The plan was non qualified, it was a liability on their books and at risk.

Upon termination, if a “retiree”, which meant 20 years of service and age> 55, then the plan would pay out over 5 years upon termination for whatever reason.
If not a retiree, it all came out post termination along with any severance and long term incentives.

I walked at the end of last year with a generous package of 15 months of pay and employee healthcare.  Long term incentives were paid out and I received the first year of my deferred comp.  Lots of tax for me this year.  The next four years of deferred comp helps me delay a pension which although frozen upon termination, pays more the later I start it and opens up some options for 401k to Roth conversion's.

It worked well in my case, but I know some senior level folks who got reorgd out and they got pounded.  Looking back, the worst possible scenario would have been to be in the plan for 18 or so years and be < 55 and forced out.

Bottom line is every plan is different and you need the plan docs so you can evaluate the risk, benefits, etc.

I worked at a large US telecom company.[/quote]

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