Walmart corporate officers and highly compensated salaried associates are eligible to take part in a Deferred Compensation Matching Plan (DCMP).
What is a DCMP?
DCMPs allow eligible employees to defer income beyond a 401(k) or similar retirement plan. This is an excellent way to delay salary & Management Incentive Plan (MIP) into future years. This is great for retirement, college funding or other expenses. Deferring compensation can help reduce your tax liability as well.
DCMPs get complicated fast. Let’s discuss three important factors to consider when making your elections:
The DCMP offers a 6% match on eligible compensation over the IRS limit ($330,000 in 2023). This is like 401(k) company matching. There are few things to know when maximizing the match on your 401(k) and DCMP.
The amount deferred under the DCMP may lower the value of 401(k) matching contributions. Walmart offers a DCMP Match calculator to make sure you are maximizing both matches.
Start the clock
Any match in the DCMP takes 3 years to vest so it is best to make elections ASAP and receive at least the 6% match. Don’t leave free money on the table!
How deferral works
The DCMP enrollment period is December 1 - December 31, 2022. Elections will defer salary and/or MIP earned one fiscal year in the future, for example 2024 (February 2023 – January 2024). You are making decisions now about future expected earnings.
New for this year, participants can select from a variety of funds that provide market-based returns. Previously, amounts deferred could earn a rate of return based on the 10-year U.S. Treasury Note yield + 270 basis points (2.7%), adjusted annually.
The fixed rate returns will only be available for existing balances. Further, to retain eligibility, the fixed rate option must be selected for the entire prior balance.
It is important to recognize the risk involved in utilizing a DCMP. Funds deferred are not secured. There is risk of becoming a creditor in the event of Walmart’s bankruptcy or insolvency.
Multiple deferral options available
To get started, go to netbenefits.com to enroll in the DCMP. You will need to register as a new user if you are new to Fidelity.
You can make unique elections for each deferral type (base salary, MIP & company match). For example, you can defer $200 per pay period from base salary and 50% of MIP.
You may also decide how to receive distributions in the future for each deferral type. You can choose distributions:
- Lump sum
- Annual installment payments over 1 – 15 years
In-service (still employed at Walmart)
- Lump sum on a certain month & year of your choice
- Lump sum to beneficiaries
- Annual installment payments over 1 – 15 years to beneficiaries
The DCMP creates a powerful opportunity to plan for your future. This also creates complexity and confusion. There are many rules and details you must consider before making selections. It is paramount to understand how these decisions fit into your overall financial plan.
If you have questions or would like to discuss, please schedule a complimentary call with us.
To living your ideal life,
The Paradigm Team
Paradigm Advisors is a fee-only financial planning firm based in Dallas, Texas and Fayetteville, Arkansas. Paradigm Advisors provides comprehensive financial planning and investment management services to help clients organize, grow and protect their wealth throughout life’s journey. Paradigm specializes in advising well-established career executives through financial planning and investment management. As a fee-only fiduciary and independent financial advisor, Paradigm never receives commission of any kind. Paradigm is legally bound by certification to provide unbiased and trustworthy financial advice.