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