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Deferred Compensation Agreements Template for United States

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Key Requirements PROMPT example:

Deferred Compensation Agreements

"I need a Deferred Compensation Agreement for our new CFO who will be deferring 30% of their annual bonus and 20% of their base salary, with a 5-year vesting period and special provisions for early vesting in case of a change in control; the agreement should be compliant with both US and UK tax laws as the executive splits time between both jurisdictions."

Document background
Deferred Compensation Agreements are sophisticated legal instruments used by organizations to provide tax-advantaged compensation arrangements for key employees and executives. These agreements, governed by United States law, allow individuals to postpone receiving a portion of their earnings until a future date, typically retirement or another specified event. The document must be meticulously drafted to ensure compliance with Internal Revenue Code Section 409A, which governs nonqualified deferred compensation arrangements and imposes strict requirements on timing of deferrals and distributions. The agreement becomes necessary when companies wish to offer additional compensation benefits beyond qualified retirement plans, help executives with tax planning, or create golden handcuffs to retain key talent. It includes detailed provisions about deferral amounts, vesting schedules, distribution triggers, and compliance requirements, while also addressing various scenarios such as change in control events or early termination.
Suggested Sections

1. Parties: Identifies the employer and employee/executive entering into the agreement

2. Background: Establishes the context and purpose of the agreement, including the intention to provide deferred compensation in compliance with Section 409A

3. Definitions: Defines key terms including Deferred Compensation, Separation from Service, Change in Control, and other 409A-compliant terms

4. Amount of Deferred Compensation: Specifies the amount or formula for determining deferred compensation and timing of deferrals

5. Vesting Provisions: Details the vesting schedule and conditions for the deferred compensation

6. Distribution Provisions: Specifies the timing and form of payment distributions in compliance with 409A requirements

7. Payment Triggers: Defines permissible payment events (e.g., separation from service, disability, death) in accordance with 409A

8. Funding and Security: Describes any trust arrangements or other funding mechanisms, noting the unfunded nature of the arrangement

9. Administration: Details how the plan will be administered and who has authority to interpret provisions

10. Claims Procedures: Outlines the process for submitting and appealing claims

11. Amendment and Termination: Specifies conditions under which the agreement can be modified or terminated

12. General Provisions: Includes standard contractual provisions such as governing law, notices, and entire agreement

Optional Sections

1. Change in Control Provisions: Additional provisions specifically addressing treatment of deferred compensation upon a change in control event

2. Golden Parachute Limitations: Include when payments might trigger excise taxes under IRC Section 280G

3. Competing Activity Restrictions: Non-compete and non-solicitation provisions, if applicable

4. Performance-Based Compensation: Special provisions for performance-based compensation with different deferral election timing rules

5. International Tax Provisions: Include for executives who may be subject to tax in multiple jurisdictions

6. SERP Provisions: Additional provisions if the agreement includes supplemental retirement benefits

7. Rabbi Trust Provisions: Detailed trust provisions if a rabbi trust is being used to hold deferred compensation assets

Suggested Schedules

1. Schedule A - Deferral Elections: Details of the executive's initial deferral elections and timing

2. Schedule B - Vesting Schedule: Detailed vesting schedule and any acceleration provisions

3. Schedule C - Distribution Election Form: Form for specifying the timing and form of distributions

4. Schedule D - Beneficiary Designation Form: Form for designating beneficiaries for death benefits

5. Schedule E - Performance Metrics: If applicable, details of performance-based vesting conditions

6. Appendix A - Section 409A Compliance: Detailed provisions ensuring compliance with Section 409A requirements

7. Appendix B - Definition of Change in Control: Detailed definition of change in control events under 409A

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions





































Clauses






























Relevant Industries

Financial Services

Technology

Healthcare

Manufacturing

Retail

Professional Services

Energy

Telecommunications

Real Estate

Insurance

Pharmaceuticals

Consumer Goods

Media and Entertainment

Relevant Teams

Human Resources

Legal

Finance

Tax

Compensation

Executive Management

Board Secretariat

Compliance

Payroll

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Executive Vice President

Senior Vice President

Division President

Managing Director

General Counsel

Department Head

Regional Director

Senior Sales Executive

Key Technical Expert

Research Director

Principal Scientist

Senior Partner

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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