Determining Your Walmart DCMP Contribution: 4 Things to Consider

During the Walmart DCMP Election Window in December, participants will make 3 key decisions:

1. How much to contribute to the DCMP.
2. When to receive distribution payouts from the DCMP.
3. How to invest funds in the DCMP.

We'll cover each decision in detail over the next few weeks. In this article let's discuss a framework to help you determine how much to contribute to the Walmart DCMP. Key questions to consider are:

1. How much are you eligible to contribute?
2. How much cash flow do you need to cover your living expenses?
3. How to prioritize deferring income taxed at the highest rates?
4. How do you ensure you're receiving the maximum DCMP Matching Contribution?

#1 How Much Are You Eligible to Contribute?

While both Sr. Directors and Officers have access to the DCMP, the contribution limits differ:

• Sr. Directors: Can contribute up to 80% of MIP.
• Officers: Can contribute up to 100% of MIP and 80% of base salary.

Note: Your election in December 2024 impacts the Base Salary paid out in Calendar Year 2025 and the MIP paid out in Calendar Year 2026.

#2 How Much Cash Flow Do You Need to Cover Expenses?

The decision to contribute to the DCMP is irrevocable once the window closes. It is important to consider your expenses for the upcoming year to ensure that you will have enough cash to cover them. Typically, the key expenses to account for are:

1. Fixed Expenses: Mortgage, car payments, student loans.
2. Living Expenses: Utility bills, groceries, gas, travel and children’s activities.
3. Other Savings: Contributions to your 401(k), Health Savings Account (HSA), 529 Plan, and investment accounts.
4. Upcoming Large Expenses: Tuition, car purchases, home renovations, and any tax liabilities.

This assessment is especially important for Officers who plan to contribute base salary and MIP to the DCMP while using equity compensation for expenses.

Taurus Financial Planning provides clients with detailed cash flow projections to help them determine the appropriate contribution amount to the Walmart DCMP. For assistance with this analysis, schedule a quick consultation—I'm happy to help!

#3 Prioritize Deferring Highly Taxed Dollars

Not all taxable income is taxed at the same rate. As a Walmart leader, some of your income may be taxed at 10%, while other portions may be taxed at rates as high as 37%. A smart strategy is to prioritize deferring income taxed at 32% or higher at the federal level.

Using 2024 tax brackets, this means:

• For Married Couples: Prioritize taxable income above $383,900.
• For Single Filers: Prioritize taxable income above $191,950.

Taurus Financial Planning offers clients tax projections to identify the contribution amount that provides the highest marginal tax benefit. If you want to gain better insight on how the Walmart DCMP can help reduce your tax bill, feel free to schedule some time on my calendar.

#4 Maximize Your Walmart DCMP Match

Walmart offers a 6% match on eligible DCMP contributions. For the DCMP, you are eligible to receive a 6% match on cash income (Base Salary and MIP) above $345,000 for 2024. The limit will be adjusted slightly higher in 2025.

For example, if your combined base salary and MIP is $500,000, you would be eligible for a 6% match on $155,000 ($500,000 - $345,000). This results in an eligible match of $9,300 ($155,000 * 6%). If your goal is to simply maximize the Walmart match, in this example you would contribute $9,300 to the DCMP.

Resource: Here is a short tutorial on the relationship between the Walmart DCMP Match and the 401(k) Match.

Video: The Walmart 401(k) Match vs. DCMP Tax Savings

Wrap-Up

I hope this gives you a useful framework for deciding how much to contribute to the Walmart DCMP. Next week, we'll cover how to select the best distribution schedule for an effective DCMP strategy.

If you have any questions about the Walmart DCMP or want to see if working with a financial planner is right for you, feel free to reply to this email or schedule some time on my calendar. I'm happy to help!

Resources:

Is the Walmart DCMP Right for You?

Thanks for reading,

Mark Chisenhall, CFA, MBA

Taurus Financial Planning

[email protected]

Taurus Financial Planning is a Fee-Only Wealth Management firm based in Bentonville, AR. The firm offers comprehensive financial planning, tax planning and investment management to corporate executives across the country.

Taurus Financial Planning is a Registered Investment Advisor with the State of Arkansas. This information is provided as a guide to assist you in your financial planning. The specific examples are provided for illustration purposes only and are not representative of specific investments or guarantees of future returns. Please consult with a professional for specific questions regarding your particular situation. If there is any error or inconsistency between this document and the official company plan documents, your company plan documents will govern.