What are deferred compensation plans

what are deferred compensation plans

Broward County > Benefits > Section VI - Deferred Compensation and Retirement Plans

Story 1


A deferred compensation account will help you to:

  • Reduce your current income taxes
  • Save for your retirement
  • Accumulate investment earnings on a tax deferred basis
  • Deferred compensation is an enhancement to retirement benefits allowing you to save money for your retirement today and defer income taxes on those savings until you make withdrawals from your account. It reduces your taxes each pay period through income deferral, and provides future benefits for retirement. (Sometimes it is referred to as a “457 Plan” since deferred compensation plans are permitted and administered under Section 457 of the Internal Revenue Code.)

If you are nearing retirement, IRS Code allows you to make up for contributions not deferred in previous years of employment. You can “catch-up” for three consecutive calendar years prior to the

calendar year of your declared normal retirement age. The total amount you can catch-up is determined by subtracting what you have contributed from the maximum allowed by law. The maximum amount you can defer in a single year is a combination of your regular deferral for that year and any amounts allowed but not contributed since 1979. Each calendar year’s maximum, set by the IRS, differs and is subject to change. Contact Payroll for current dollar amounts and additional information.

  • Contributions to your deferred compensation account are taken from your gross salary before federal withholding taxes are calculated (Look at the table below to see what a significant difference this can make!)
  • Your deferred compensation contributions do not affect your reported earnings for retirement purposes
  • Social security taxes are not affected by deferred compensation contributions
  • Your contributions are invested in the investment program of your choice offered by the provider you select

Source: www.broward.org

Category: Bank

Similar articles: