The deferred management incentive agreement plan is designed to allow a specific group of highly compensated employees to hold back a part of their basic compensation in a separate account until the retirement period. There are also various other situations, which determines the time period of the deferred incentive agreement plan.
The situations are change in control of the company, a specific date set forth by the employee, the occurrence of an emergency situation in the company and the employee’s death. Under all the above circumstances, the agreement plan will be terminated between the employer and the employee.
According to the terms and conditions of the deferred management incentive agreement, the employee does not face any tax deduction, when the cash is being deferred. The amount is taxed at the normal tax rate, when it is paid to the employee at the end. The employer also receives a tax deduction, when the amount equal to the employee payment is paid.
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