10.4.3 Deferred Compensation Plans
Employers or employees can institute a deferred compensation plan which allows the employee (usually a key person such as an owner) to forego a portion of his customary scheduled salary (such as bonuses and salary increases) for a time, usually until retirement. At that time, the policy's cash value works as supplemental retirement income for the employee. If the covered employee dies before retirement, the plan's beneficiary inherits the funds.
Deferred compensation plans are nonqualified plans that are comprised of a contractual agreement to pay benefits in the future.
