Hello, this is a TAX question regarding deferred compensation. What is a highly compensated person under ERISA...

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Hello, this is a TAX question regarding deferredcompensation.
What is a highly compensated person under ERISA (thequalified deferred compensation rules)? Why is that definitionsignificant and how is it applied?

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Deferred compensation is a portion of an employees compensation that is set aside to be paid at a later date In most cases taxes on this income are deferred until it is paid out Forms of deferred compensation include retirement plans pension plans and stockoption plans An employee may opt for deferred compensation because it offers potential tax benefits In most cases income tax is deferred until the compensation is paid out usually when the employee retires If the employee expects to be in a lower tax bracket after retiring than when they initially earned the compensation they have a chance to reduce their tax burden There are two broad categories of deferred compensation qualified and nonqualified These differ greatly in their legal treatment and from an employers perspective the purpose they serve Deferred compensation is often used to refer to nonqualified plans but the term technically covers both Qualifying Qualified deferred compensation plans are pension plans governed by the Employee Retirement Income Security Act ERISA including 401k plans 403b plans and 457 plans A company that has such a plan in place must offer it to all employees though not See Answer

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