Deferred Compensation
Deferred compensation is technically an account payable that represents an employer's liability to pay in the future for services that have been rendered.
Deferred Compensation is offered to Non-employee directors and select executive officers.
Income taxation may be deferred from when compensation is earned, provided that the employer's obligation is no more than a mere unsecured promise to pay benefits at a future date.
A person who is eligible to defer compensation usually does so through a written election that is made before the person performs the services for which compenation is being deferred.
An employer may commit to credit deferred compensation accounts with (1) matching contributions, (2) pension accruals lost under a tax-qualified plan due to annaul limits, (3) a fixed percentage of pay,or (4) a formula amount tied to corporate profits or other performance measures.
Employer's have broad discretion to determine the investment return that will be credited on deferred compensation accounts.
