A capitalization agreement is usually entered into when the assets are deposited by the claims of the employer`s creditors, z.B. into a trust or receiver account. A qualified retirement plan is the classic capital plan. A plan is generally considered to be funded when assets are separated or set aside, so they are identified as a source to which participants can seek payment of their benefits. For the purposes of the NQDC, it is not relevant that the assets were identified as employee-owned. The question is whether the worker has an economic interest in assets, for example. B if the amounts are protected by the employer`s creditors, or if the worker is able to use these amounts as collateral. If the agreement is funded, the benefit is likely to be taxable under IRC 83 and 402 (b). Dol Advisory Opinion 90-14A. However, DOL indicated that a “top hat” consists of people who can significantly influence or influence the design and operation of the deferred compensation plan. DOL Advisory Opinion 90-14A (May 8, 1990). The NQDC plan cannot allow for further postponement or a change in choice (for example. B deferred compensation at age 70 instead of 65) only under certain conditions.
This assumes that the next election takes place at least 12 months before the start of the originally scheduled payment, that the amendment to the next election delays the payment date by at least five years and that the election is effective only at least 12 months after it has been made. Deferred compensation plans provide flexibility for both the employer and the worker. According to the “economic benefit” doctrine, a worker is taxed on certain rights when the worker enjoys the economic benefits of those rights. According to this doctrine, benefits are included in gross income when assets are transferred unconditionally and irrevocably into a fund for the benefit of the worker and the worker has a clean contribution not without effect.  In Minor v. United States, 772 F.2d 1472 (9. Cir. 1985), the Tribunal found that “the doctrine of economic benefits is applicable only if the employer`s promise is in line with value” and “a current economic benefit can be assessed if the employer contributes to the deferred compensation plan of a worker who has not lost, (ii) is fully viable. and (iii) are guaranteed against the employer`s creditors by a trust agreement.” Since worker rights are not protected “against employer creditors,” the doctrine of economic benefits in the creation of the NQDC plan should not trigger immediate taxation. Under an unqualified plan, employers generally only derive expenses if the income is covered by the employee or service provider. On the other hand, under a qualified plan, employers have the right to deduct expenses per year, although employees only record income in the years following receipt of distributions.