The Deferred Compensation Plan is another way to boost your savings—it lets you save tax-free money beyond the annual 401(k) contribution limits. It’s available to certain sales and management employees.
While this is a separate plan, both deferred compensation and 401(k) are managed by Fidelity. As a reminder, the deferred compensation plan is not your 401(k). You need to enroll in the 401(k) plan separately. Be sure to familiarize yourself with the plan differences before you enroll.
- Executive: Must earn $100,000 or more and be on a bonus plan
- Sales: Must be on a Sales Representative Incentive Plan
How to Enroll
Unless you’re a new hire, open enrollment for this plan takes place each September:
- Executives may set aside up to 50% of base salary for the calendar year. You may also set aside up to 100% of your total incentives earned during the year.
- Sales employees may set aside up to 100% of your commissions and incentive payments for the year. Employees must meet a minimum income threshold before deferrals begin.
- Choose your investment mix. The plan has a similar set of financial investment options as are available under the 401(k).
- Make your distribution election. This election must be made at the time that you enroll; unlike a 401(k), you have the option of electing an in-service distribution. In any case, you are required to make an election for how you want your funds distributed upon termination.
New hires have a 30-day waiting period before becoming eligible for enrollment into this plan. You then have an additional 30 days to enroll for the remainder of the year. You must re-enroll each year, and you can’t change your enrollment during the year.
It’s important to tell you that while the plan has great savings benefits, there are some risks along with it—most importantly, that your account isn’t protected by most federal retirement laws, and may be garnished by any creditors Hitachi Vantara owes in the case of company bankruptcy. You should seek advice from your tax adviser and/or financial consultant before you enroll.
This is also taken out of your paycheck before your Retirement Savings 401(k) contributions are taken out, which helps to reduce your taxable earnings.