Deferred Compensation is a portion of an employee’s income that is paid out at a later date, typically post-retirement, often used in executive compensation plans to defer taxes.
- What is deferred compensation?
Answer: It is income deferred to a later date, often for retirement, to defer taxes. - What are examples of deferred compensation?
Answer: Examples include 401(k) contributions and stock options. - What are the benefits for employees?
Answer: It offers tax advantages and retirement income planning. - What are the risks associated with it?
Answer: Risks include employer bankruptcy or changes in tax laws. - How is deferred compensation taxed?
Answer: It is taxed when distributed, typically as ordinary income.
