Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Comparison tables scroll horizontally on smaller screens.
Updated July 29, 2026. Quick answer: There is a second safe harbour, and it has no schedule requirement at all. 4 U.S.C. §114(b)(1)(I)(ii) protects a payment received after termination of employment from a plan “maintained solely for the purpose of providing retirement benefits for employees in excess of the limitations” imposed by the qualified-plan rules. Even a lump sum qualifies — if the plan really is that.
The word doing all the work is “solely”
The statute lists the limitations it means — the qualified-plan contribution and benefit limits. A plan maintained solely to provide benefits above those ceilings qualifies. A plan that also does other things does not.
New York has applied this exception and denied it, which makes the boundary concrete rather than theoretical. In an advisory opinion on a partner agreement at a certified public accounting firm, the Department concluded there were “no facts that indicate … that the Agreement was maintained solely to provide supplemental retirement benefits to equity partners in excess of the limitations of the Firm’s 401(k) plan … Therefore, the exclusion … is not applicable.” The payments were held taxable.
Deferred pay is worth a second opinion before it starts
How a payout is structured, and when it begins, interacts with the rest of the retirement picture, and an adviser can look at the whole arrangement alongside the accounts and the timing before anything is elected.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here. You stay on this page.
What happens when you press the button
It asks about nine questions (age, investable assets, location), then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button. Submitting the form does not guarantee an adviser or a match. This matching form is not tax or legal advice. Submitting the form does not guarantee an adviser or a match. This matching form is not tax or legal advice.
What the ruling teaches
| Plan characteristic | Helps or hurts the argument |
|---|---|
| Plan documents state the excess-benefit purpose explicitly | Helps |
| Benefits are calculated by reference to the qualified-plan limits | Helps |
| The arrangement also serves retention, bonus deferral or partner compensation | Hurts |
| It is simply a nonqualified plan with no stated excess-benefit purpose | Fatal — that was the fact pattern that lost |
So do not assume this exception covers you because your plan is nonqualified. Being nonqualified is what makes the question arise; it is not what answers it. The plan document is the evidence, and it was written long before anyone was thinking about a move. If the schedule route is available, ten years is the far more reliable protection.
Sources
4 U.S.C. §114(a) and §114(b)(1), including subparagraph (I) and its clauses (i) and (ii); IRC §3121(v)(2)(C); IRC §409A(a)(2)(A) and (a)(4)(C); IRC §415 and §401(a)(17); NY Advisory Opinion TSB-A-24(11)I. All read July 2026.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.