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Deferred Compensation

How is Deferred Compensation Handled in a New York Divorce? 

Deferred compensation is an agreement between an employer and employee that a portion of the employee’s income will be paid out at a later date.

It is important to ask questions about your spouse’s deferred compensation, as some forms of deferred compensation are among the easiest assets to hide. Many clients who are not in charge of household finances might not realize that their spouse has these potentially high-income benefits.

Common examples of deferred compensation include: 

  • Retirement plans (IRA, 401(k) plans)
  • Pensions
  • Deferred savings
  • Stock-option plans of many kinds, including restricted stock units (RSUs) and non-qualified stock options (NQSO)
In New York, you do not usually pay taxes on deferred income until you receive it, which is an important consideration in a divorce. 

Deferred Compensation Can Be Qualified or Non-Qualified

A qualified plan is one that complies with the Employee Retirement Income Security Act of 1974 (ERISA). ERISA has many regulations, one of which is how much employee income can qualify. The employer’s contribution is typically tax-deductible.

A non-qualified plan allows the employer to be more flexible in the terms of the deferred compensation, including who receives it, in what amounts (percentage of income) and in most cases, the employer’s contribution is not tax deductible.

Contact Lisa Today

As both a family law attorney and Certified Divorce Financial Analyst, Lisa Zeiderman can assist in performing a complex financial evaluation of yours and your spouse’s executive compensation to determine their worth and make sure your financial interests are protected. Call 914-488-2402 to schedule a consultation. She has offices in New York City and White Plains. 

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