Deferred Compensation Examples In Nassau
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State:
Multi-State
County:
Nassau
Control #:
US-00417BG
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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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FAQ
These plans help employees save for the future and reduce their tax bills. For example, an employee earning $200,000 annually at age 58 might defer $25,000 annually until retiring at age 65. The employee's deferred compensation plan would then hold $175,000.
A credit card that offers zero interest rates is an example of a deferred payment arrangement, since the bank that supplies the line of credit will collect the monthly payments without the revenue that would normally be guaranteed by the interest added.
The normal contribution limit for elective deferrals to a 457 deferred compensation plan is $23,500.