A deferred compensation plan is a plan that sets aside a share of an employee’s income until a specified date. These plans are usually for the highest earners of a company who do not need their current total annual income to live on and are seeking to reduce their tax burden. As the plan name suggests, deferred compensation strategies work similarly to 401k plans in that money is placed into an account so that it may grow in a tax-deferred manner. However, unlike 401k plans, there are fewer if any penalties for early distribution of funds when it comes to deferred compensation plans.
Bridge Benefits Group helps companies assess whether a Deferred Compensation Plan is correct for the company, then assists that company in obtaining a plan that fits the need. We walk business owners through their options then negotiate on their behalf to help ensure expectations are being met. The correct plan is one that is tailored for your company so that key employees can address their retirement goals.
This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.