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

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