A technique that employees can use to defer taxes and save money. An employee defers part of his or her salary into a deferred compensation plan. The money grows tax-free until it is withdrawn, at which time taxes are owed. Deferred compensation plans are part of pension, stock option, and profit-sharing plans.
Compen-sation that is paid to an employee at a time later than the one at which it was earned, with the tax on that compensation deferred as well. Often in the form of stock options in the employer corporation.