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For high-earning executives who have already maximized their 401(k) contributions, a Deferred Compensation Plan (DCP) offers a strategic next step in advanced retirement and tax planning. But what makes a DCP truly unique, and why should top-tier professionals pay attention? 

The Deferred Compensation Advantage: More Than Just Another Retirement Plan

Unprecedented Contribution Flexibility

Unlike the traditional 401(k) with its strict contribution limits, a Deferred Compensation Plan provides remarkable savings potential:

• There are no contribution limits, so it’s possible to defer up to 100% of salary and bonus
• And create a more aggressive savings and tax management strategy

Tax Strategy Powerhouse

The DCP isn’t just a savings vehicle—it’s a sophisticated tax optimization tool. By strategically deferring income, executives can:

• Potentially lower their current tax bracket
• Shift income to future years when tax rates might be more favorable
• Create a more predictable long-term tax strategy

Key Differences That Matter

Contribution Limits

• 401(k): $23,500 in 2025. For those age 50 and older, an additional $7,500 can be contributed. And for those ages 60 thru 63, the additional contribution amount is $11,250.
• DCP: Up to 100% of all forms of compensation, including equity based compensation such as Restricted Stock Units (RSUs). Translation: Dramatically higher savings potential

Company Match

• 401(k): Most employers make at least a safe harbor match
  • Option 1: 100% up to 3% plus 50% of next 2%
  • Option 2: 100% of up to at least 4%
  • Alternatively, a 3% non-elective contribution can be made
• DCP: There is complete flexibility and discretion on employer contributions

Timing and Flexibility

• 401(k): Frequent election changes
• DCP: More strategic, long-term planning approach
  • Deferral elections become irrevocable at year-end
  • Minimum three-year deferral period
  • Requires more intentional financial planning

Strategic Distribution Options

The Deferred Compensation Plan offers unique distribution strategies:

• Scheduled in-service distributions (i.e. can receive distributions prior to age 59 ½ without tax penalty)
• Upon Retirement or separation from service
• Ability to extend deferral periods strategically
• Lump-sum or annual installment options

The Strategic Trade-Offs

Potential Risks to Consider

• Potential exposure to company creditor claims
• Less immediate access to funds compared to 401(k)

When a DCP Shines

Ideal for executives who:

• Are in a high current tax bracket
• Expect lower tax rates in retirement
• Want to smooth out income over time
• Have a stable, long-term career trajectory

Real-World Scenario

Imagine a 49 year old executive earning $500,000 annually with a $100,000 bonus:

• 401(k) limit: $23,500
• DCP potential: Up to $600,000 could be deferred
• Potential tax deferral: Significant reduction in current tax liability

The EBS Approach

We don’t just present options—we craft personalized strategies that align with your unique financial landscape. Our team specializes in helping high-performing executives:

• Maximize retirement savings
• Optimize tax strategies
• Create comprehensive wealth management plans