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WellBeing

Broward CountyWellBeingDeferred Compensation Info
Retirement Savings

Deferred Compensation can:

• Reduce your current income taxes
• Save for your retirement
• Accumulate investment earnings on a tax deferred basis

More Info
Deferred Compensation

Enhance Your Retirement

Deferred compensation is an enhancement to retirement benefits allowing you to save money for your retirement today and defer income taxes on those savings until you make withdrawals from your account. It reduces your taxes each pay period through income deferral, and provides future benefits for retirement. (Sometimes it is referred to as a “457 Plan” since deferred compensation plans are permitted and administered under Section 457 of the Internal Revenue Code.)

A Great Way to Save! 
Deferred compensation gives you a significant tax break:
  • Contributions to your deferred compensation account are taken from your gross salary before federal withholding taxes are calculated.
  • Your deferred compensation contributions do not affect your reported earnings for retirement purposes
  • Social Security taxes are not affected by deferred compensation contributions
  • Your contributions are invested in the investment program of your choice offered by the provider you select
Without a deferred compensation plan:
  • You pay taxes on income before you set any aside for savings or investments
  • You have less money to save or invest after taxes are taken out
  • With a deferred compensation plan, your contributions are made on a pretax basis
  • You can contribute more money to your saving/investment plan
You pay no income taxes on your contributions or investment earnings until you withdraw from the plan, allowing earnings to grow on a tax-deferred basis. 
For example, if you are in the 28 percent tax bracket, contribute $100 per month to your deferred compensation account and earn 8 percent interest, this account would be worth $58,902 after 20 years. In the same tax bracket, still earning 8 percent interest, but in a savings account, if you contributed $100 each month the savings account would be worth only $44,913 after the same 20 years.
When you withdraw money from the account (there are restrictions on when you may withdraw prior to retirement without penalty) you pay taxes on the amount you withdraw; you will most likely be in a lower tax bracket at that time and will likely pay less in taxes than you would have today.
Deferred compensation has both unique restrictions and unique flexibility.  For more information, contact the account representative for the plan.

Normal and ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Catch Up Contributions

For 2019, the normal deferral amount allowed is $19,000 and if over age 50, there is a Catch-Up amount allowed of $6,000.
If you are nearing retirement, IRS Code allows you to make up for contributions not deferred in previous years of employment. You can “catch up” for three consecutive calendar years prior to the calendar year of your declared normal retirement age. The total amount you can catch up is determined by subtracting what you have contributed from the maximum allowed by law. The maximum amount you can defer in a single year is a combination of your regular deferral for that year and any amounts allowed but not contributed since 1979. Each calendar year’s maximum, set by the IRS, differs and is subject to change. Contact Employee Benefits for current dollar amounts and additional information.
Be sure you understand that:
  • Deferred compensation is a voluntary program
  • Deferred compensation funds are subject to IRS regulations
  • There are strict IRS restrictions on withdrawals prior to retirement
  • Benefit-eligible employees can begin or stop contributions to a deferred compensation account at any time
  • You must begin receiving benefit payments no later than April 1 of the calendar year following the year you reach 70½, or the year in which you actually retire, if later
Providers and additional plan information are available from Employee Benefit Services at 954-357-6700.​​