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A DEFERRED COMPENSATION PLAN
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What it is:
- For the executive ... a plan for deferring
income
- For the corporation ... an executive incentive
plan using life insurance which has reduced
effect on its current cash flow and surplus
account
How it works:
Advantages:
- Retain employer control of asset and plan
- No IRS approval needed
- May selectively favor one or more employees
- Low-cost fringe benefit using life insurance
tax leverage
- Recruit new employees
- Retain older employees
- Accumulate tax free funds to pay benefits
- Possible cost recovery or gain to employer
- Defer current employee income taxes until
benefit payout.
CONCEPTS INDEX
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