Voluntary Deferral Plan

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Voluntary Deferral Plan

An employee retirement plan in which an employee may elect to place a portion of his/her wages or salary into an account. The money in this account is invested and distributed following retirement and the employee does not have to pay tax on this income until retirement. What distinguishes a voluntary deferral plan is the fact that it is not governed by the Employment Retirement Income Security Act. For that reason, the employer may choose which employees can participate in the voluntary deferral plan.
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* unfunded employee account balance deferred compensation plans (which largely encompass voluntary deferral plans);
Employee account balance plans, often referred to as "voluntary deferral plans," provide an employee with the opportunity to elect to receive deferred benefits in lieu of a portion of current compensation, a raise, or a bonus.
For the sake of clarity, let's focus on just one of these new design opportunities: using the 409A "subsequent election" role in conjunction with voluntary deferral plans.
Here's why I recommend that every voluntary deferral plan contain such a subsequent election provision, even though it sounds complicated:
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