How the SECURE Act May Impact Retirement Distribution Elections: Yellow bollards on a dock to secure ships mooring lines and seagulls facing against the wind

How the SECURE Act May Impact Retirement Distribution Elections

November 13, 2020

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Did you see our article on We were honored when Editor-in-Chief Bruce Brumberg asked to republish the insightful report written by Fulcrum Partners Managing Director and Partner, Bruce Brownell. Subscribers to can read the article in entirety here:  NEW! Impact Of The SECURE Act On NQDC Plans And Retirement Distribution Elections.

We’ve included an excerpt from it below, along with a link to our original publication, downloadable as a PDF: Impact of the SECURE Act 2019 on NQDC Plans and Retirement Distribution Elections, A Fulcrum Partners Executive Benefits Advisory Report

Impact Of The SECURE Act On NQDC Plans And Retirement Distribution Elections

EXCERPT: The SECURE Act of 2019 was signed into law by President Trump on December 20, 2019. SECURE, an acronym for Setting Every Community Up For Retirement Enhancement, is a bipartisan initiative to update and expand aspects of defined contribution (DC) retirement plans, with the intention of making them more accessible to employees, and at the same time less complex for employers. … This article addresses effects the SECURE Act will also have on nonqualified deferred compensation (NQDC) plans, specifically looking at the matter of retirement distribution elections.

The terms of Section 409A require that plan participants elect the timing and form of their retirement payouts. However, 409A does not require that the payout be taken as a lump-sum payment, even though many plans default to this timing… many NQDC plans allow only one retirement distribution election, providing plan participants with just one bucket. All money within a single bucket follows the same distribution election.

If that’s how your plan works, consider a multiple-bucket approach, with a unique payout schedule for each bucket, providing increased flexibility and potential tax savings. For example, three to five buckets with unique distribution characteristics could allow for a combination of a lump sum, five annual installments, or ten annual installments. Each bucket can have its own asset allocation, which makes sense given the diverse timeframes.

Even more flexible is a class-year approach for better management of payout timing and amounts. In a class-year approach, a plan participant elects discrete distribution schedules year by year. For example, in the 2021 Plan Year the participant may elect a lump sum. But for the 2022 year the election could be five annual installments for 2022 deferred amounts. Most plan administrators can support such a design. The question is: Do your plan documents allow it? 

For further information, you’ll want to read the entire article. You may also want to talk to a member of the Fulcrum Partners team to evaluate if your plan is creatively and flexibly designed to help ensure that executives and plan sponsors have the options and opportunities they need to achieve their goals and objectives.

How the SECURE Act May Impact Retirement Distribution Elections: seagulls in the sunset

#BruceBrownell #SECUREAct #retirement


This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through Lion Street Advisors, LLC (LSA) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI and LSF/LSA are non-affiliated entities and separate entities from OneDigital and Fulcrum Partners.

Unless otherwise noted, VAI/VSI, LSF/LSA are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.

Lion Street Advisors // Lion Street Financial

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