Deferred Compensation Plans for Executives

McCarthy, Clarence F.
September 1950
Labor Law Journal;Sep50, Vol. 1 Issue 12, p945
Academic Journal
The article reports on deferred compensation plans for executives. Senior executives in American industry are interested in plans by which they can forego a salary increase, of which Uncle Sam will take more than fifty per cent, in exchange for obtaining a promise on the part of the corporate employer to pay them after retirement age a smaller amount of compensation or pension, which will be taxed in those years at probably no more than thirty per cent. The employee's corporation may be willing to pay such deferred compensation, but usually will prefer to adopt a "qualified" plan to do so. However, the senior executive can obtain more money under a "non-qualified" plan. Maximum tax advantages are granted to the qualified plan of deferred compensation. The employer obtains full deduction for all payments, whether to an insurance company or to a trust, and, subject to limitations as to amounts, such payments are deductible in the year they are paid. Finally, the employee does not have taxable income unless and until he actually receives cash either from the trust or the insurance company, as the case may be.


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