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How to Enter Deferred Compensation in Boldin

This article explains how to account for deferred compensation in your Plan

Written by Nancy Gates

How to Enter Deferred Compensation in Boldin

Non-qualified plans and governmental 457(b) plans

A deferred compensation plan lets you set aside part of your salary or bonus now and receive it later, often after you leave your job. Plans vary a lot by employer, so the best way to enter yours depends on how it pays out. This article helps you pick the right method. You can enter it yourself, or let Boldin AI make the entries for you.

How deferred compensation works

Non-qualified plans (NQDC) are the most common type offered by private employers. Here's what to know:

  • You don't pay income tax on deferred pay until you receive it. Payouts are taxed as ordinary income.

  • Social Security and Medicare taxes are paid when you earn the money, not when it's paid out.

  • You elect a payout schedule in advance, usually a lump sum or annual installments, often starting when you leave your job.

  • There are no RMDs and no 10% early withdrawal penalty. The money can't be rolled into an IRA.

  • Your balance is an unsecured promise from your employer, so it's only as secure as the company.

Governmental 457(b) plans are offered by state and local government employers. They work much like a 401(k), with RMDs, but without the 10% penalty when you withdraw after leaving your job.

Which method should I use?

Your situation

Use this method

You know your future payout amounts, or you're receiving a lump sum

Method 1: Enter payouts as a pension

You're still contributing to a non-qualified plan with a set payout schedule

Method 2: Deferred comp account + scheduled transfers

You have a governmental 457(b) plan

Method 3: Tax-deferred account with RMDs

GOOD TO KNOW

Using Boldin AI: Copy the prompt for your method, replace everything in [brackets], and paste it into Boldin AI. Each prompt asks Boldin AI to show you the entries before saving, so you can check them first.

Method 1: Enter payouts as a pension

Use this method if you already know what you'll receive and when. For example, you may have stopped contributing and your plan statement shows your payout schedule, or you're retiring and will receive a lump sum.

For annual installments

COPY THIS PROMPT INTO BOLDIN AI

Please add my deferred compensation payouts to my plan:

1. In Income > Pensions, add a pension called "[Company] Deferred Comp" that pays $[amount] per year, starting [date] and ending [date].

2. Set the tax treatment to Yes, so the payouts are taxed as ordinary income.

3. Don't add an annual increase.

Before saving, show me the entry.

For a lump sum

COPY THIS PROMPT INTO BOLDIN AI

In Income > Pensions, add a Lump Sum pension called "[Company] Deferred Comp" for $[amount] on [date]. Set the tax treatment to Yes. Show me the entry before saving.

Enter it yourself

  1. Go to My Plan > Income > Pensions and press Add a pension.

  2. Choose annual payments or a lump sum, and give it a descriptive name, for example "ACE Deferred Comp."

  3. Enter the amount and dates from your plan statement.

  4. Select Yes for the tax treatment.

Method 2: Deferred comp account + scheduled transfers

Use this method if you're still contributing to a non-qualified plan and want to see your balance grow before it pays out. You'll create an account for your deferred comp, add your contributions, and model your payout schedule as transfers.

Enter it with Boldin AI

COPY THIS PROMPT INTO BOLDIN AI

Please add my deferred compensation plan using these steps:

1. In Assets and Debts, create a tax-deferred 401(k) account called "[Company] Deferred Comp" with a balance of $[current balance]. Set the optimistic rate of return to [X%] and the pessimistic rate to [X%].

2. Exclude the "[Company] Deferred Comp" account from my withdrawal strategy.

3. Under my job "[job name]," add a contribution of $[amount or % of salary] per year to the "[Company] Deferred Comp" account, starting [date] and ending [date]. Deferred comp isn't subject to 401(k) limits, so if Boldin caps this contribution, add the rest in Money Flows as a standard contribution to the same account.

4. My plan pays out in [number] annual installments starting [date]. In Money Flows, add annual transfers from the "[Company] Deferred Comp" account to my [taxable savings account name]. Size each payment so the account reaches $0 after the last payment, based on my plan's projected balance. [Or: Use these amounts from my plan statement: year – $amount, year – $amount, …]

Before saving, show me each entry and your payout calculation.

For a single payout: In step 4, ask for one transfer of the full balance on your payout date.

Enter it yourself

  1. Go to My Plan > Assets and Debts and create a 401(k) account with a descriptive name, for example "ACE Deferred Comp."

  2. Enter your balance and your optimistic and pessimistic rates of return.

  3. Exclude the account from your withdrawal strategy, then save.

  4. Go to My Plan > Income and add your contribution under your job. If your contributions go over the IRS 401(k) limit, enter the rest in Money Flows as a standard contribution.

  5. Go to My Plan > Money Flows > Transfers. Add your payout schedule as transfers from the deferred comp account to a taxable savings account.

TIP

Check Insights > Savings to see your deferred comp balance over time. If your payouts are set up correctly, the balance reaches $0 after the last payment.

WHY EXCLUDE THE ACCOUNT?

Excluding the account keeps Boldin from drawing on it for everyday spending. Your deferred comp pays out only on the schedule you entered, just like your real plan.

KNOWN LIMITATION

Boldin treats this account like a 401(k), so it will calculate RMDs if you still have a balance at RMD age. Non-qualified plans don't have RMDs. If your payouts continue past RMD age, your projected income in those years may be off. Most payout schedules end well before then.

Method 3: Governmental 457(b) plans

A 457(b) plan works like a 401(k), with RMDs, so you can enter it as a regular tax-deferred account. Leave it in your withdrawal strategy so Boldin can draw from it as needed.

Enter it with Boldin AI

COPY THIS PROMPT INTO BOLDIN AI

Please add my 457(b) plan using these steps:

1. In Assets and Debts, create a tax-deferred 457(b) account called "[Employer] 457(b)" with a balance of $[current balance]. If a 457(b) account type isn't available, use a 401(k) account. Set the optimistic rate of return to [X%] and the pessimistic rate to [X%].

2. Under my job "[job name]," add a contribution of $[amount or % of salary] per year to this account, starting [date] and ending [date].

Before saving, show me each entry.

Enter it yourself

  1. Go to My Plan > Assets and Debts and create a tax-deferred account for your 457(b).

  2. Enter your balance and rates of return.

  3. Go to My Plan > Income and add your contributions under your job.

Still have questions?

Deferred comp plans vary widely, so check your plan documents for your payout options and deadlines. For more help:

  • Ask Boldin AI.

  • Use Support Chat by clicking your initials in the upper right corner of your plan.

  • Consider a coaching session or a Boldin Advisors engagement.

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