Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation
A contractual agreement between the employer and key employees in which the employer promises to pay the employees a future benefit.
Advantages & Considerations
- Can provide an added incentive for employees to remain with employer
- Employees may be individually selected
- Government approval is not required
- Additional source of retirement income
- A current salary increase might be subject to higher income taxes for the employee and compensation received during retirement may be taxed at a lower rate.
- Only for use with a select group of management or highly compensated employees
- Deferral of employer’s tax deduction
- Care should be taken to ensure that when applicable, the arrangement is compliant with ERISA and IRC § 409A