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IRC §409A timing rules
NQDC Planner
Defer high comp to a lower-tax retirement year. Powerful, but the §409A rules are unforgiving.
Current annual salary
Annual deferral %
Employer match % (of deferral)
Years until distribution
Current marginal federal rate
32%
35%
37%
Expected retirement marginal rate
22%
24%
32%
35%
Assumed annual growth on deferred balance
5%
7%
9%
Employer financial strength
Strong (investment grade)
Medium
Weak (high yield)
Deferral economics
Annual deferral
$0
salary not currently taxed
Annual employer match
$0
subject to vesting and §409A
Projected balance at distribution
$0
tax-deferred growth
Tax savings vs taking cash
$0
arbitrage between now and retirement rate
Distribution scenario:
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§409A timing rules loading...
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Cite: IRC §409A (election timing, distribution events, 20% penalty for violations), §3121(v)(2) (FICA at deferral).
Have us model your NQDC election properly
NQDC is unfunded and unsecured. If your employer goes bankrupt, you stand in line with general creditors. Election deadlines under §409A are HARD. Talk to us before December 31 of the year before deferral. Phone 689-331-5723.