he wants. If he is allowed to do either of those 2 things or both, he often has to pay taxes on it right away. Taxation In a deferred comp plan, unlike an ERISA (such as a 401(k) plan), the company does not get to deduct the taxes in the year the contribution is made, they deduct them the year the contribution becomes non-forfeitable. For example, if ABC company allows SVP John Smith to defer $200,000 of his compensation in 1990, which he will have the right to withdraw for the first time in the year 2000, ABC puts the money away for John in 1990, John pays taxes on it in 2000. If John keeps working there after 2000, it does not matter because he was allowed to receive it (or "constructively received") the money in 2000. Other circumstances around deferred comp. Most of the provisions around deferred comp are related to circumstances the employee's control (such as voluntary termination), however, deferred compensation often has a clause that says in the case of the employee's death or permanent disability, the plan will immediately vest and the employee (or estate) can get the money. Performance-linked incentives Long-term incentives are paid five or at least three years out. They are often a mixture of cash and shares of stock in the company, or some other type of equity compensation such as stock options, which are almost always subject to restrictions based on time, performance, or both, known as vesting. Clawback of "faithless servant" employee compensation Under the faithless servant doctrine, which is a doctrine under the laws of a number of states in the United States, and most notably New York State law, an employee who acts unfaithfully towards his or her employer must forfeit all compensation received during the period of disloyalty, which compensation is subject to clawback by the employer. References Income in the United States