Deferred Compensation

Deferred compensation is a means to provide certain key employees with additional retirement benefits.

• The business owner or key employee enters into a legal agreement with the company that will provide benefits at retirement, death, or disability, as long as they stay with the company.
  
  
• The company sets aside money in either an insurance or an investment contract. The company owns the product, pays for it, and is the beneficiary.
  
  
• Contributions to a deferred compensation program are not considered current income to the employee/owner. They are not currently deductible to the business. However, they become deductible when paid out and are taxable as regular income to the employee/owner at that time.
  
  
• The investment is considered to be a business asset.