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Can deferred compensation be garnished?

Can deferred compensation be garnished?

In a recent District Court decision, a court held that non-qualified deferred compensation benefits being paid to a participant under a “top hat” plan could be garnished by the participant’s creditor.

Is deferred compensation protected from creditors?

The short answer is yes. You can defer a significant portion of your compensation under a non-qualified retirement or deferred compensation plan. Deferred compensation plans are safe from your own creditors, but not the claims of your employer’s creditors.

How do I avoid paying taxes on deferred compensation?

If your deferred compensation comes as a lump sum, one way to mitigate the tax impact is to “bunch” other tax deductions in the year you receive the money. “Taxpayers often have some flexibility on when they can pay certain deductible expenses, such as charitable contributions or real estate taxes,” Walters says.

Can a pension plan be garnished by the government?

As a result, companies work hard to guarantee protection for their customers. However, the law does not state that all pension plans must meet the requirements. It only states that plans that you wish to be protected should meet their guidelines.

When do you get paid from a deferred compensation plan?

A deferred compensation plan withholds a portion of an employee’s pay until a specified date, usually retirement. The lump sum owed to an employee in this type of plan is paid out on that date.

Can a retirement fund be garnished by a court?

If you’re at retirement age and you find yourself facing extensive debts, you could be worried about garnishments of your retirement funds via a court order. It’s common for individuals with sizable debts, regardless of age, to be approached by creditors to repay these debts.

Why are non qualified deferred compensation plans called golden handcuffs?

Non-qualified deferred compensation (NQDC) plans, also known as 409 (a) plans and ” golden handcuffs ,” provide employers with a way to attract and retain especially valuable employees, since they do not have to be offered to all employees and have no caps on contributions.

Can a court garnish a pension plan account?

Creditors and courts will not be given access to your personal pension plan for any reason. Your pension money is safe in that account under the ERISA, but you should be aware of some scenarios in which it might become legal for creditors or courts to obtain some of your pension funds.

A deferred compensation plan withholds a portion of an employee’s pay until a specified date, usually retirement. The lump sum owed to an employee in this type of plan is paid out on that date.

Can a state pension be garnished under ERISA?

Even if your pension account is not a state or federal one, it should still be protected under the ERISA. The brokerage or firm that you choose to open up the account can go over the details of making sure your account is protected with you.

Which is an example of qualified deferred compensation?

Some examples of qualified deferred compensation include 401 (k) and 403 (b) plans. ERISA also restricts the amount of money that can be deposited into a qualified plan. For example, the 401 (k) plan limits the contribution of employees into the pension account at $19,500.