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What to do with distribution of non-qualified defered compensation / pension

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Recently laid of from a job/company with which I had a non-qualified cash balance plan.  Paperwork says balance below IRS 402(g) limit so receiving lump sum payment of $15k.  

Am I correct to understand I can't do anything tax advantaged with this sum?  If it matters, I'm 57.  

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rated:
Guywhogetsit said:   Recently laid of from a job/company with which I had a non-qualified cash balance plan.  Paperwork says balance below IRS 402(g) limit so receiving lump sum payment of $15k.  

Am I correct to understand I can't do anything tax advantaged with this sum?  If it matters, I'm 57.  

  
I don't understand the "cash balance" part. I participate in a non-qualified salary deferral plan. When I received distributions from this plan, I couldn't do anything tax advantaged with it - was sent a check with certain tax deductions. No FICA though. Age didn't matter. BTW - if laid off, are you applying for unemployment benefits? You should be able to get those.

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Well, if it's non-qualified, it's already taxed so it shouldn't count as income.

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ZenNUTS said:   Well, if it's non-qualified, it's already taxed so it shouldn't count as income.


Non qualified pensions are tax deferred.

I'm pretty sure that they don't have Roth versions.

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Thank you. I will get taxed on this - hence the hope I could move it somewhere for it to grow pre-tax.

I took longer than I should have to apply for unemployment - somehow thought it might be retroactive and also had thought it wasnt much money. Dont see indication I can get retroactive benefit and more money than I thought. Certainly enough to pay my substantially increased family medical insurance costs.

Thanks again.

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Yes, you will get taxed as ordinary income for both Federal and (if applicable) state income tax.  The good news, if any, is that it isn't subject to the 10% early withdrawal penalty for being under 59-1/2 (since not a qualified plan).  

"Cash balance" is a form of defined benefit plan that looks like a defined contribution plan -- each year a participant in a cash balance plan gets pay credits (deposits) and interest credits (usually at a some index rate) on the existing balance.  This is likely an "top hat" plan that picked up the benefit over the compensation limit.  At termination they can force out at higher than the $5k limit applicable to qualified plans, so OP's former employer used the $18k 402(g) limit as a way to have some indexed value that wouldn't require them to hold small balances (and at the same time wouldn't be likely to push the recipient into a new tax bracket).

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Thank you!

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