One well known, yet unexpected result of the COVID-19 pandemic was the mass exodus of individuals out of city centers. For many, that exodus extended to moving out of state, particularly for those seeking to move from high to low income tax states.

Informally funding a DCP without Triggering Distribution Requirements
In order for Real Estate Investment Trusts (“REITS”) to maintain their designated tax treatment status, they must meet the annual REIT testing requirements. REITS are required to distribute at least 90% of taxable income in the form of dividend payments to their shareholders. Income realized through the growth of mutual funds – even to pay an employee benefit – must be included in the taxable income calculation, causing significant shortfalls when plan balances rise.

Executive Summary

This article explores how a company can use a deferred compensation plan (“DCP”) as a tool to overcome the executive recruitment and retention challenges produced by “The Great Resignation”.

No, DCPs restore lost savings opportunities and fit in an egalitarian culture.

Many companies say yes. Here are the reasons why:

Issue: Highly compensated employees (HCEs) are in fact discriminated against by 401(k) contribution limits and testing. In 2022, an HCE is defined by the IRS as having total compensation of $135k or more (IRC Section 415).