J—Deferred Compensation

In allowing selected management or highly compensated employees to defer income until after retirement, deferred compensation offers multiple tax advantages to both the employer and the participant.

CORPORATE OBLIGATION. To illustrate, assume we have a key corporate manager who is currently age 45. Under its terms, the plan would provide for retirement payments, at age 65, of $10,000 per year for 10 years. These payments would be tax-deductible to the corporation when made, and, although taxable to the retired employee, presumably he would pay less in taxes due to a reduced retirement income and resulting lower marginal tax bracket.