What is an elective deferral?
“Elective” deferral means that the employee chooses whether to participate in the plan and chooses the amount of income they will defer into the plan instead of receiving it as compensation. Taxable income in the current year is reduced by the amount of the deferral. Taxes on the deferral amounts are delayed until the money is withdrawn.
Related Questions
- Do the regulations address the time frame in which a participant’s elective deferral must be sent to the provider?
- Do the regulations address the time frame in which a participant’s elective deferral must be sent to the vendor?
- What is compensation for the purpose of determining contributions and elective deferral limits?
