Deferred compensation

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deferred compensation

An arrangement in which a portion of an employee's income is paid out at a date later than income is actually earned. Examples include pensions, retirement plans, and stock options. The primary benefit of most deferred compensation plans is the deferral of tax.

Similar to a 401(k), deferred compensation is a way for some or all employees of an organization to defer up to 100% of their income, earning a return on the dollars they would have paid in taxes.

An associated risk of deferred compensation plans is that once you have "deferred" your pay it becomes part of the assets of the corporation. If the company fails, your assets become at risk.


Links

Deferred compensation--what is it?, Bogleheads forum discussion
Deferred Compensation, Bogleheads forum discussion

Definitions of deferred compensation on Google