As a member of Walmart’s leadership team, you have access to unique financial benefits designed to help you build wealth while managing your tax burden. One of the most powerful yet often misunderstood tools available to you is Walmart’s Deferred Compensation Matching Plan (DCMP). At Pathway by Willow, we specialize in helping Walmart executives and leaders navigate these complex benefits to optimize your financial future.
What is Deferred Compensation?
Deferred compensation, as the name suggests, is regular compensation that’s paid at a later date. Instead of receiving certain earnings now, you can choose to defer them to a future time, typically retirement, creating a tax-advantaged way to supplement your traditional retirement savings.
For Walmart leadership, this benefit comes in the form of a Non-Qualified Deferred Compensation (NQDC) plan. They provide significant savings opportunities, and they’re structured to encourage your continued commitment to the company’s success.
Understanding Qualified vs. Non-Qualified Plans
Let’s break down the two types of deferred compensation plans in simple terms:
- Regular Retirement Plans (like your 401(k))
- Special Executive Plans (like Walmart’s DCMP)
Walmart’s Deferred Compensation Matching Plan falls into this second category, giving you more options for tax-advantaged retirement saving beyond your regular 401(k).
The Tax Advantages of Walmart’s DCMP
One of the greatest benefits of Walmart’s DCMP is the potential tax advantage. When you defer compensation through this plan, you’re essentially postponing income tax on those earnings until withdrawal, which offers two key benefits:
- Current tax reduction: By deferring a portion of your income now, you reduce your current taxable income when you’re likely in a higher tax bracket.
- Future tax optimization: By taking distributions during retirement when you’re potentially in a lower tax bracket, you can pay less in taxes on the same amount of money.
For Walmart executives and senior directors who are often in peak earning years, this tax deferral strategy can add up to substantial savings over time. When combined with the interest generated by your deferred compensation, this can provide a significant boost to your retirement income.
How Walmart’s DCMP Works
Walmart’s DCMP allows eligible participants to defer parts of their compensation with matching contributions from Walmart. Here’s how the program works:
Eligibility and Contribution Limits
- Officers can defer up to 80% of their base salary and up to 100% of their annual bonus
- Eligible salaried associates can defer up to 80% of their annual bonus
Unlike your 401(k), there are no statutory limits on how much you can defer through the DCMP (outside of the percentage limits above), making it an excellent vehicle for additional tax-deferred saving.
Walmart’s Matching Contribution
Similar to the 401(k) matching program, Walmart’s DCMP offers a dollar-for-dollar match up to 6% of eligible compensation that exceeds the IRS limit for qualified plans (which is $345,000 for 2024). These matching contributions vest 100% after you complete your third year of participation in the plan.
Investment Options
The DCMP gives you flexibility to invest your deferred compensation in various market-based return options, including stock funds, bond funds, and funds with a mix of both. You can change your investment allocation throughout the year, allowing you to adjust your strategy as needed.
Distribution Options
Another advantage of Walmart’s DCMP is the flexibility in how and when you receive your money:
- While employed at Walmart: You can elect to receive in-service distributions at a specific month and year of your choosing
- When you leave Walmart: You can choose either a lump sum payment or annual installments over 1-15 years
- Legacy planning: You can structure payments to beneficiaries as either a lump sum or annual installments
The Risks of Deferred Compensation
While the DCMP offers significant advantages, it’s important to understand the associated risks:
Company Financial Stability
The most significant risk is that, unlike qualified plans, funds in an NQDC plan aren’t protected from creditors if the company faces bankruptcy. As a participant, you’re essentially an unsecured creditor of Walmart. While Walmart’s financial stability makes this risk minimal for most, it’s an important consideration when determining how much of your compensation to defer.
Limited Access to Funds
Once you’ve elected to defer compensation, those elections are locked in for the year. You won’t be able to access those funds early except under very specific circumstances:
- On a fixed date stipulated in your plan
- Upon retirement
- If there’s a change in company ownership or control
- In case of disability or death
- Due to an unforeseen emergency that can’t be covered by any other financial means
Impact on 401(k) Eligibility
It’s important to note that the amount you elect to defer through the DCMP may reduce your 401(k) matching eligibility. Walmart’s DCMP calculator is a useful tool to help you maximize both matches.
Structuring Your Deferred Compensation Plan
The ideal structure for your DCMP participation depends on your unique financial situation, goals, and timeline. Here are some key considerations:
Timing Your Deferrals
The DCMP enrollment window runs from December 1–31 each year, and once closed, you won’t be able to elect deferral of any other income for that year. This makes it critical to carefully consider your expected expenses and financial goals for the upcoming year.
Balancing Short and Long-term Needs
When deciding how much to defer, carefully consider:
- Your current cash flow needs
- Expected major expenses in the coming year
- Your retirement timeline
- Other savings and investment vehicles
- Your current and expected future tax brackets
Distribution Strategy
How you structure your distributions can have significant tax implications:
- Consider spreading out distributions to avoid pushing yourself into a higher tax bracket
- Coordinate the timing with other income sources, such as Social Security benefits or other retirement accounts
- Align distributions with specific financial goals, such as education funding or major purchases
Integrating Your DCMP into Your Broader Financial Plan
The DCMP is most effective when viewed as one component of your comprehensive financial strategy. Working with a financial advisor who understands Walmart’s specific benefits can help you:
- Optimize tax planning: Balance current tax reduction with future tax liabilities
- Coordinate all retirement vehicles: Strategically utilize your DCMP, 401(k), IRAs, and other investments
- Align with your life goals: Structure deferrals and distributions to support major life events and goals
- Manage risk: Determine the appropriate amount to defer based on your risk tolerance and Walmart’s financial outlook
- Create a distribution strategy: Plan how and when to receive distributions to maximize tax efficiency
What Happens When You Leave Walmart?
Whether due to retirement, a new career opportunity, or other reasons, it’s important to understand how your DCMP benefits are handled when you separate from Walmart:
- Vesting: Your matching contributions vest 100% after your third year of participation in the plan
- Distribution timing: Lump-sum payments typically occur six months after your separation date
- Installment payments: If you elected installments, your first payment would typically begin in February if you left between February and June, or in the seventh month following separation if you left between July and January
Final Thoughts: Acting Now for Future Benefits
The DCMP enrollment window is only open for a brief period each year (December 1-31), and your decisions during this window will impact your finances for years to come. At Pathway by Willow, we specialize in helping Walmart executives and leadership teams navigate these complex benefits.
Unlike other financial advisors, we operate on a fee-only, flat fee model, ensuring our advice is always aligned with your best interests. Our deep expertise in Walmart’s specific benefit structures allows us to provide targeted guidance that maximizes your financial opportunities.
Whether you’re considering DCMP participation for the first time or looking to optimize your current strategy, our team is here to help you make informed decisions that support your long-term financial goals.
Contact Pathway by Willow today to schedule a consultation and discover how we can help you transform financial complexities into simple solutions that provide clarity and peace of mind.
Disclosure: This blog post is for informational and educational purposes only. It is not intended as financial, investment, or tax advice. Please consult a financial advisor, accountant, or attorney before making any decisions based on this content.
