Deferred Compensation- What Employers Need to Know

Short summary

This article explains deferred compensation arrangements including deferred cash, phantom stock, SARs, profits interests, restricted stock, and stock options, and their role in attracting and retaining key employees. It outlines key IRS compliance requirements including written documentation, timing of deferral elections, permissible payment events, and operational administration. Noncompliance can trigger immediate taxation plus a 20% additional tax and interest penalties.

• •Deferred compensation helps attract and retain key employees but carries complex tax compliance requirements
• •Common forms include deferred cash, phantom stock, SARs, profits interests, restricted stock, and stock options
• •Noncompliance can result in immediate taxation, 20% additional tax, and interest penalties

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