10 Tax Facts Advisors Should Know About Deferred Compensation

The retirement needs of the typical U.S. worker can be well served by consistent participation in a payroll deferral 401(k) plan, with the potential to complement pre-tax savings with after-tax contributions to Roth-style and private brokerage accounts. However, executive-level employees often face more complex financial situations and may require additional options to help them meet their retirement goals. In many workplaces, nonqualified deferred compensation plans play an integral part in a total compensation package designed to attract and retain these key employees. While they are potentially powerful savings vehicles for highly compensated clients, deferred compensation arrangements are also complex from an operational and tax management perspective. As such, advisors with a solid knowledge base regarding nonqualified deferred compensation arrangements are highly valued by both business owners and corporate executive clients. Getting the job right requires a lot of learning for advisors looking to expand their services in this arena, and a good place to start is with the deferred compensation tax basics. These insights can help advisors as their clients either set up or benefit from nonqualified deferred compensation plan arrangements. See the accompanying slideshow for a rundown of 10 important nonqualified deferred compensation facts drawn from the ALM Tax Facts library. Want more tax-focused insights? Find current and accurate answers to your tax questions with Tax Facts. (Credit: Adobe Stock)