Rich CEOs Avoid Taxes On Retirement Funds While Workers Struggle

Millions of Americans have little to nothing in retirement savings, the result of low-wage jobs that give workers minimal room to stash money away.

Photo Insert: Walmart CEO Doug McMillon held over $169 million in his deferred compensation account in yearend 2022.

However, by yearend 2021, top CEOs held $9 billion in special retirement accounts that are denied to their employees—a double standard established by the US tax code, Jake Johnson and Common Dreams reported for Raw Story.

The double standard is the subject of “A Tale of Two Retirements” published Thursday by the Institute for Policy Studies (IPS) and Jobs With Justice.

The report says that while "ordinary employees with access to 401(k) plans face strict limits on the amounts they can set aside, tax-free, for their golden years," highly paid executives of major corporations "have unlimited tax-deferred compensation accounts" known as top hat plans.

"The sections of the US tax code related to employer-provided, tax-deferred retirement accounts impose one set of strict rules on ordinary workers and another set of far more flexible rules for corporate top brass," the report notes.

"Employees with 401(k) plans face hard caps on the amounts they can set aside in these accounts every year. By contrast, Section 409A of the tax code allows top corporate executives to place unlimited amounts in special 'non-qualified tax-deferred compensation' accounts."

These funds are only taxed when they are withdrawn, letting executives reap the benefits of years of investment returns tax-free.

The analysis shows that "at more than 20 low-wage employers, executives have deferred compensation funds to generate monthly retirement checks larger than their workers' median annual pay," pointing to Walmart CEO Doug McMillon (who held over $169 million in his deferred compensation account at yearend 2022) and former Home Depot CEO and current board chair Craig Menear (who has $15 million in a deferred compensation account).

The executive with the largest top hat account among S&P 500 company heads is Paul Saville, CEO of the homebuilding giant NVR, Inc. At the end of 2022, Saville held $488 million in deferred compensation account—which could yield $3 million a month in retirement checks for the rest of his life.

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