Non-Qualified BEP Plan

[anonymous]

Does anyone here participate in the Non-Qualified Benefit Equalization Plan (BEP) at BMS? Appears to be a deferred compensation plan. Allows individuals to contribute pre-tax money (after maxing out 401K/Roth). Looks like BMS will match up to 6% of eligible income into this plan. Its tax deferred until withdrawals.

I was concerned because it says that the accounts are unfunded and paid from the general assets of BMS. These assets are subject to claims of creditors. Unlike the BMS 401K which are protected away in a trust.

I intend to max out my 401K first. But is it worth contributing additional money to this plan?

 

[anonymous]

Does anyone here participate in the Non-Qualified Benefit Equalization Plan (BEP) at BMS? Appears to be a deferred compensation plan. Allows individuals to contribute pre-tax money (after maxing out 401K/Roth). Looks like BMS will match up to 6% of eligible income into this plan. Its tax deferred until withdrawals.

I was concerned because it says that the accounts are unfunded and paid from the general assets of BMS. These assets are subject to claims of creditors. Unlike the BMS 401K which are protected away in a trust.

I intend to max out my 401K first. But is it worth contributing additional money to this plan?

I got put into the BEP after I had exceeded the annual IRS contribution limits in the 401K. Fidelity has someone who works with this plan so you could call and ask for more details. I for one don't like it because you are only allowed to change your contribution during the enrollment period at the end of the year which also includes your 401K. So if you have something come up during the year where you wanted to reduce your contribution to have more money in your paycheck you can't make that adjustment. I really don't like that it's unsecured either with the current state of the company. While the probability that something like bankruptcy is low, I personally don't like the risk and I am tying to get out of it for next year by lowering my 401K contributions. Another thing is that once you leave the company it's paid in a lump sum so it could have some tax consequences.

 

[anonymous]

Not true on the lump sum. Read the details. You can decide the timing of how it’s paid out. Also if you’re willing to leave 6% free money annually on the table for potential bankruptcy risk, you are foolish.

 

[anonymous]

Not true on the lump sum. Read the details. You can decide the timing of how it’s paid out. Also if you’re willing to leave 6% free money annually on the table for potential bankruptcy risk, you are foolish.

Fidelity told me it was paid out in a lump sum,I recently asked. Doesn't mean they know what they are talking about though.

 

[anonymous]

Fidelity told me it was paid out in a lump sum,I recently asked.

Here's how it works (had a colleague leave years ago who got surprised by this). Yes it gets paid out in a lump sum, pretty much immediately UNLESS during the annual enrollment period at least a year earlier you go in and change the way it is paid out. Still "lump sum" but the TIMING can be changed. Instead of having it pay immediately, you can push off the timing to be 5 years later.

Why would you want to do this? To avoid a hefty tax bill dumped in your lap. With 5 years to plan, you can optimize the year it's going to land, with respect to other income (and I believe state taxes apply too, so optimize to be in a low/no tax state).

 

[anonymous]

Fidelity told me it was paid out in a lump sum,I recently asked. Doesn't mean they know what they are talking about though.

 

[anonymous]

You can decide how you want it paid. You have the opportunity to make your selection once a year and the change is effective one year later. I.e. if you make a decision in December 24, it will be effective from December 25. The default setting is lump sum so if you do nothing, then that's what will happen. Note that when you decide to defer, you have to delay minimum 5 years.

 

[anonymous]

There are some tax benefits of establishing residence in Puerto Rico. Has anyone thought of taking the lump sum after moving to Puerto Rico?