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UPDATES! Tax Reform: Good Or Bad For Pretax Compensation Deferral?

Tax reform has complicated the decision of whether to participate in your company’s NQDC plan. This article provides a perspective on how to decide whether or not to defer pretax compensation.



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Key Points in This Article
Tax reform lowered income tax rates and raised tax bracket thresholds. Does that mean you should stop deferring compensation in your company’s NQDC plan? While it appears counterintuitive, lower tax rates combined with larger bracket ranges can make deferral even more attractive.
What really matters is the spread between your tax rate now and your tax rate at retirement.
Participating in a nonqualified deferred compensation plan could provide a critical component of your future income, but there are three circumstances that may offset the benefits of pretax income deferral.