Walmart DCMP: How Do I Eventually Get Paid?

One of the most common questions regarding the Walmart Deferred Compensation Matching Plan (DCMP) is how participants eventually receive their payments. These inquiries typically fall into two categories: administrative and strategic.

Let's first address the administrative component before exploring how to schedule your DCMP payouts in a tax-efficient and practical way.

Receiving Your DCMP Payouts

1. Direct Deposit: Typically, participants set up a direct deposit and payouts will be deposited in your bank account.
2. February Payouts: In most cases, payouts are distributed in February each year. For example, if you leave Walmart on February 1st (a very common retirement date at Walmart) your DCMP payouts will usually begin the following February.
3. Walmart DCMP Team: Although the Walmart DCMP is administered by Fidelity Investments, there is a dedicated support team within Walmart to assist you. These team members are Walmart employees and can be a valuable resource for any administrative questions you may have.

Scheduling Your DCMP Payouts

In December, you will elect when you would like to receive distributions from your Walmart DCMP. You have three options:

1. Lump Sum: A one-time payment after you leave Walmart.
2. Annual Installments: Annual payments spread over multiple years.
3. In-Service Distributions: Payouts can be scheduled during your tenure at Walmart.

For those aiming to build significant wealth within the Walmart DCMP, annual installments are generally the most tax-efficient option. This approach allows you to spread payments over multiple years, helping you avoid large payouts that push you into a higher tax bracket.

The most common mistake I see is when Walmart DCMP participants choose the Lump Sum payment option. This results in all the funds being paid out and taxed in a single year, which can lead to a higher tax burden. It's important to be mindful of key breakpoints in the U.S. income tax brackets when selecting your distribution schedule.

At Taurus Financial Planning , we project your Walmart DCMP payouts across various scenarios to help you elect a tax-efficient and practical distribution schedule.

3 Factors to Consider for Scheduling DCMP Payouts

When deciding on the timeline for your distributions, consider the following factors:

1. Tax Efficiency: Keep your taxable income within a lower tax bracket. Take enough distributions to cover living expenses while avoiding higher tax thresholds, factoring in other income sources like Social Security, required minimum distributions and earnings from a post-Walmart career.
2. Credit Risk: Your DCMP contributions carry credit risk. If Walmart declares bankruptcy, you’ll be a creditor. To mitigate this, consider higher early distributions and smaller amounts later.
3. The 5+1 Rule: You can adjust your payment schedule, but changes must be made at least one year before leaving the company and distributions must be delayed by a minimum of five years. This rule was put in place after Enron executives accelerated their Deferred Compensation payouts.

Wrap-Up

How Walmart DCMP participants choose to receive their distributions is a critical component of a successful DCMP strategy. I’ve seen participants contribute a significant amount only to select a lump sum payment, resulting in a hefty tax bill that negates the DCMP tax benefits.

If you catch this issue early enough, you do have the option to adjust your payment schedule, but you must adhere to the "5+1 Rule."

If you have any questions about setting up your Walmart DCMP distribution schedule, feel free to reply to this email or schedule a free consultation. I'm happy to help!

More Resources:

Is the Walmart DCMP Right for You?

4 Things to Consider When Electing Your Walmart DCMP Contributions

Is the Walmart DCMP Worth it for a Sr. Director?

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.

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