Deferred compensation is an arrangement in which a portion of an employee's income is paid out at a date after which the income is actually earned. A Deferred Compensation Agreement is a contractual agreement in which an employee (or independent contractor) agrees to be paid in a future year for services rendered. Deferred compensation payments generally commence upon termination of employment (e.g., retirement) or death or disability before retirement. These agreements are often geared toward anticipated retirement in order to provide cash payments to the retiree and to defer taxation to a year when the recipient is in a lower bracket. Although the employer's contractual obligation to pay the deferred compensation is typically unsecured, the obligation still constitutes a contractual promise. Deferred Compensation Agreement Template: A deferred compensation agreement is a legal document that outlines an arrangement between an employer and an employee to postpone the receipt of part of the employee's compensation until a specified future date. It is often used as a tool to attract and retain key employees and provide them with additional financial incentives. Example of a Deferred Compensation Agreement: [Insert Company Name] [Insert Address] [City, State, Zip Code] [Insert Employee Name] [Insert Address] [City, State, Zip Code] This Deferred Compensation Agreement ("Agreement") is entered into as of [Insert Date], by and between [Insert Company Name] (the "Company") and [Insert Employee Name] (the "Employee"). 1. Deferred Compensation Amount: The Employee agrees to defer a certain portion of their annual compensation as specified by the Company. This deferred amount shall be paid out on [Insert Future Date] or upon the occurrence of a specific triggering event, such as reaching a certain age or years of service, as determined by the Company. 2. Vesting: The deferred compensation amount shall become fully vested on [Insert Date] or in accordance with the Company's vesting schedule, if any. If the Employee terminates employment before becoming fully vested, they may forfeit a portion or all of the deferred compensation, as determined by the Company. 3. Payment Terms: The deferred compensation shall be paid out to the Employee in a lump sum, installments, or as otherwise agreed upon by both parties. The payment timing, frequency, and method shall be clearly stated in Exhibit A, attached hereto and incorporated by reference. 4. Tax Considerations: The Employee understands and acknowledges that any deferred compensation paid under this Agreement is subject to applicable federal, state, and local taxes. The Company may withhold necessary taxes from the deferred compensation payment or adjust the Employee's future compensation to cover the tax obligations. 5. Change in Control: In the event of a change in control of the Company, such as a merger or acquisition, the rights and obligations under this Agreement shall be governed by the terms specified in Exhibit B, attached hereto and incorporated by reference. 6. Governing Law: This Agreement shall be interpreted and enforced in accordance with the laws of the state of [Insert State], without regard to its conflict of laws principles. IN WITNESS WHEREOF, the parties hereto have executed this Deferred Compensation Agreement as of the date first above written. [Insert Company Name] By: [Insert Authorized Representative Name] Title: [Insert Authorized Representative Title] [Insert Employee Name] Types of Deferred Compensation Agreement Templates: 1. Defined Benefit Plan: This type of deferred compensation agreement provides a predetermined benefit at retirement based on factors such as the employee's salary history and years of service. It is commonly found in pension plans. 2. Nonqualified Deferred Compensation Plan: A nonqualified plan allows an employer to provide additional benefits to select employees beyond what is offered in traditional retirement plans. These plans are not governed by the Employee Retirement Income Security Act (ERICA) and can offer more flexibility in terms of contribution limits and payout terms. 3. Stock Option Plans: Stock option plans can be considered a type of deferred compensation agreement, where employees are granted the option to purchase company stock at a predetermined price in the future. This type of arrangement aligns the employee's financial interests with the company's performance. 4. Cash Deferral Plans: Cash deferral plans allow employees to defer a portion of their salary or bonuses to a future date. This type of agreement is commonly used as an additional incentive for high-performing executives and can provide tax advantages if structured correctly. By utilizing a deferred compensation agreement template, employers can establish clear terms and conditions for deferred compensation arrangements with their employees. These templates provide a starting point for customization to meet specific needs and comply with relevant laws and regulations.
Deferred Compensation Agreement Template: A deferred compensation agreement is a legal document that outlines an arrangement between an employer and an employee to postpone the receipt of part of the employee's compensation until a specified future date. It is often used as a tool to attract and retain key employees and provide them with additional financial incentives. Example of a Deferred Compensation Agreement: [Insert Company Name] [Insert Address] [City, State, Zip Code] [Insert Employee Name] [Insert Address] [City, State, Zip Code] This Deferred Compensation Agreement ("Agreement") is entered into as of [Insert Date], by and between [Insert Company Name] (the "Company") and [Insert Employee Name] (the "Employee"). 1. Deferred Compensation Amount: The Employee agrees to defer a certain portion of their annual compensation as specified by the Company. This deferred amount shall be paid out on [Insert Future Date] or upon the occurrence of a specific triggering event, such as reaching a certain age or years of service, as determined by the Company. 2. Vesting: The deferred compensation amount shall become fully vested on [Insert Date] or in accordance with the Company's vesting schedule, if any. If the Employee terminates employment before becoming fully vested, they may forfeit a portion or all of the deferred compensation, as determined by the Company. 3. Payment Terms: The deferred compensation shall be paid out to the Employee in a lump sum, installments, or as otherwise agreed upon by both parties. The payment timing, frequency, and method shall be clearly stated in Exhibit A, attached hereto and incorporated by reference. 4. Tax Considerations: The Employee understands and acknowledges that any deferred compensation paid under this Agreement is subject to applicable federal, state, and local taxes. The Company may withhold necessary taxes from the deferred compensation payment or adjust the Employee's future compensation to cover the tax obligations. 5. Change in Control: In the event of a change in control of the Company, such as a merger or acquisition, the rights and obligations under this Agreement shall be governed by the terms specified in Exhibit B, attached hereto and incorporated by reference. 6. Governing Law: This Agreement shall be interpreted and enforced in accordance with the laws of the state of [Insert State], without regard to its conflict of laws principles. IN WITNESS WHEREOF, the parties hereto have executed this Deferred Compensation Agreement as of the date first above written. [Insert Company Name] By: [Insert Authorized Representative Name] Title: [Insert Authorized Representative Title] [Insert Employee Name] Types of Deferred Compensation Agreement Templates: 1. Defined Benefit Plan: This type of deferred compensation agreement provides a predetermined benefit at retirement based on factors such as the employee's salary history and years of service. It is commonly found in pension plans. 2. Nonqualified Deferred Compensation Plan: A nonqualified plan allows an employer to provide additional benefits to select employees beyond what is offered in traditional retirement plans. These plans are not governed by the Employee Retirement Income Security Act (ERICA) and can offer more flexibility in terms of contribution limits and payout terms. 3. Stock Option Plans: Stock option plans can be considered a type of deferred compensation agreement, where employees are granted the option to purchase company stock at a predetermined price in the future. This type of arrangement aligns the employee's financial interests with the company's performance. 4. Cash Deferral Plans: Cash deferral plans allow employees to defer a portion of their salary or bonuses to a future date. This type of agreement is commonly used as an additional incentive for high-performing executives and can provide tax advantages if structured correctly. By utilizing a deferred compensation agreement template, employers can establish clear terms and conditions for deferred compensation arrangements with their employees. These templates provide a starting point for customization to meet specific needs and comply with relevant laws and regulations.
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