Deferred compensation is a form of executive compensation.
It is an agreement between an employer and employee that a portion of that 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, 401k plans)
- 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 ERISA, the Employee Retirement Income Security Act of 1974. 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.
As both a family law attorney and Certified Divorce Financial Analyst, Lisa Zeiderman has the financial expertise to ask the right questions, and understands where to find the answers regarding deferred compensation. She then can assist in performing a complex financial evaluation of yours and your spouse’s executive compensation to determine their worth, always keeping in mind the cost of litigation.