Summary of NoTitle_sers.pa.gov_1769292490
- What is the accounting entry for deferred compensation?
- What kind of account is a deferred compensation account?
- What is the accounting entry for deferred income?
- How is deferred compensation paid out?
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AI Overview
AI Overview
Accounting for deferred compensation involves recognizing an expense and a corresponding long-term liability (often “Deferred Compensation Payable”) as employees earn the benefit, typically based on the present value of future payments
. It requires accruing the obligation over the service period, commonly using a straight-line method.
Key Accounting Components
Expense Recognition: Debit “Deferred Compensation Expense” to reduce net income in the period it is earned.
Liability Recognition: Credit a “Deferred Compensation Liability” account to reflect the amount owed.
Measurement: The liability is generally recorded at the present value of future payments, using the company’s incremental borrowing rate.
Adjustments: The liability may be adjusted over time based on performance metrics or for interest accretion.
Specific Considerations
Nonqualified Deferred Compensation (NQDC): These plans are often for executives and require accrual over the vesting period.
Qualified Plans: These (e.g., 401(k)s) are simpler, often requiring only a debit to expense and credit to cash upon contribution.
Taxes: FICA/FUTA taxes are generally paid in the year of deferral, unless the amount is not yet vested.
For more details, see the OneAmerica Financial or GBQ CPAs articles.
Accounting For Deferred Compensation In The Present – GBQ
Jul 18, 2019 — An example of a nonqualified deferred compensation plan is a supplemental executive retirement plan (SERP). Accounting for it. The…
GBQ CPAs
How to Account for Deferred Compensation – wikiHow
Apr 29, 2025 — Set up the proper accounts. Whether you’re using accounting software or an old-school ledger, you’ll need to have the appropriate …
wikiHow
7.3 Accounting for deferred compensation plans – Viewpoint
Jun 15, 2024 — In certain deferred compensation arrangements, the liability is more akin to a long-term payable. For example, a deferred compensa…
PwC
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You also decide which of the available funds to invest in — with aggressive, moderate, and conservative options to choose from.
You can easily change the amount you withhold from your pay and your investments whenever you choose.
Deferred comp accounts have certain tax advantages as outlined in Section 457(b) of the IRS tax code. The SERS board has contracted with Empower Retirement as the third-party administrator of this investment plan.
According to the IRS, leave payouts are eligible for deferral into deferred comp accounts. Current IRS limits affect the actual amount you can defer.
If you do not yet participate in deferred comp, there may be time to establish a new account; however, there are a number of HR, payroll, and retirement system deadlines involved that could take up to two months. (You need to have at least one payroll deferral into your new deferred comp account in order to defer your leave payout.)
Your first step is to contact your HR office to learn if you are eligible for a leave payout and the amount. Then, contact a deferred comp representative at 1.866.737.7457 to discuss the rollover process.
If you participate in another SERS retirement plan, we will send you an annual statement that provides a snapshot of all of your SERS retirement benefits as of December 31. This annual statement is in addition to the quarterly statements you receive from the third-party administrator of the deferred comp plan. Your SERS annual statement will list the contributions you made to your deferred comp account over the year and since you opened your account, any rollovers you made from other plans, the change in value of your account, the expenses withheld from your account, and any withdrawals or distributions you took from your deferred comp account over the year.
SERS retains an independent auditor to examine the deferred comp program each year.
Participants receive a quarterly newsletter with helpful tips on preparing for retirement and information about the plan.
A fact sheet that includes up-to-date information on the number of participants, contributions, and more.