What is “Deferred Compensation”?
The purpose of the Deferred Compensation Plan is to help you establish an investment savings program that grows over time and from which you can withdraw money that will supplement your retirement. The contributions you make to the plan and their interest are exempt from income taxes until you begin to withdraw the money.
Deferred compensation, under Internal Revenue Code Section 457, is a tax-favored supplemental retirement savings program that generally allows public employees to contribute a portion of their salary before federal income taxes* to a retirement account. These programs are offered exclusively to public employees and non-taxable entities, and are designed to help you build your financial security. * State income tax may also be deferred in certain states.
Participation in the Deferred Compensation Plan allows you to “defer”, or delay, receiving a portion of your income until a later date; generally when you retire. The primary purpose is to help you build up a pool of money to supplement your retirement income. This pool can be converted to income when you retire or leave employment and will add to the benefits you are expecting to receive from the Florida Retirement System (FRS) and the Social Security Administration (SSA). The State has established this Plan under section 457(b) of the Internal Revenue Code.
As a Medicaid provider, you are an independent contractor of the state of Arkansas and are eligible to defer a portion of your Medicaid income on a pre-tax basis. By making contributions to the State of Arkansas Diamond Deferred Compensation 457(b) Plan, commonly referred to as the Arkansas Diamond Plan, you can include Medicaid as an element of your retirement planning. The annual dollar limit is $15,000 for calendar year 2006 and later. If you are age 50 or older, the annual dollar limit is $20,000 for calendar year 2006 and later. This deferral is in addition to any contributions made on your behalf to a qualified retirement plan established by your group or individual practice such as a 401 (k) plan, a profit sharing plan, a money purchase pension plan or a defined benefit plan. The Arkansas Diamond Plan also includes a special pre-retirement catch-up provision which allows deferrals for three consecutive years equal to twice the dollar limit. For more information regarding the Pla
Deferred compensation is an agreement between an employer and an employee in which a portion of their earnings, or compensation for work performed, is held back, or deferred, for payment at a future time. Deferred compensation is widely used as a retirement savings plan. An employer may offer a retirement plan to their employees as part of their compensation package, which might also include health insurance as well as actual wages. Although the value of the retirement is not specified in the hourly or yearly rate of pay, it is in fact deferred compensation that will be provided to the employee at some agreed upon rate and time. Some employers participate in a deferred compensation program that allows a person to have a portion of their hourly or yearly wages invested by their employer rather than received as monetary compensation for work at the time that it is performed. There are a number of advantages to this. One advantage to deferred compensation is that the portion of their comp
