Deferred Compensation Plan For Highly Compensated Employees In Clark
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State:
Multi-State
County:
Clark
Control #:
US-00418BG
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Deferred compensation is an arrangement in which a portion of an employee's income is paid out at a date after which the income is actually earned. A Deferred Compensation Agreement is a contractual agreement in which an employee (or independent contractor) agrees to be paid in a future year for services rendered. Deferred compensation payments generally commence upon termination of employment (e.g., retirement) or death or disability before retirement. These agreements are often geared toward anticipated retirement in order to provide cash payments to the retiree and to defer taxation to a year when the recipient is in a lower bracket. Although the employer's contractual obligation to pay the deferred compensation is typically unsecured, the obligation still constitutes a contractual promise.
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The plan must be limited to provide benefits for a select group of management or highly compensated employees. These plans have been dubbed "golden handcuffs'' because they're often used as a retention tool for key talent or highly compensated employees.Some deferred compensation contracts provide that benefits are payable immediately if an employee dies or becomes disabled during the eligibility period. Before implementing a nonqualified deferred compensation plan, employers should consider the benefits and tax and compliance consequences. Deferred compensation plans have been developed to provide employers with a vehicle to set aside the addition- al funds for their employees. Deferred compensation is a plan that allows employees to delay receiving a portion of the compensation earned in one tax year to a future tax year.