Deferred Compensation Plan Tax Treatment In Florida
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Multi-State
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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 Florida Deferred Compensation Plan is an excellent way to increase retirement security. Deferred compensation allows Florida employees to set part of their earnings aside for future uses.The Florida Deferred Compensation Plan is available to help State employees bridge the savings gap. Deferred Compensation is a pre- tax investment plan, so federal taxes are not taken out of the money you contribute into the Plan. Distributions from your NQDC plan may be taxed at the state and local level depending on several factors. We'll explain the major state personal income tax considerations that apply to deferred compensation or retirement income.