IRS retreats on nonqualified/401(k) pourover plan. (Internal Revenue Service)

National Underwriter Life & Health-Financial Services Edition, May, 1994 by Fossett, Peter A.

The Internal Revenue Service has decided to prohibit the use of a nonqualified deferred compensation plan to collect 401(k) contributions until the 401(k) maximum could be determined at the end of each year. The approach was a creative solution to the dilemma of preventing excess contributions to defined savings benefit plans while ensuring maximum contributions. It is important for financial planners to note this change.

Revoking a letter ruling okaying contributions to a 401(k) plan of money initially held in a nonqualified deferred compensation plan, the Internal Revenue Service recently threw cold water on a creative approach to 401(k) funding designed to ensure maximum 401(k) contributions while preventing excess 401 (k) contributions and the administrative burdens...

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