Deferred Compensation Agreement - Physician Contract Glossary

Deferred Compensation Agreement

Definition

A contract specifying future income or benefits to be paid after your employment ends.

Examples in Context

“The physician will receive deferred compensation equal to 20% of net collections for three years post-termination.”

“If the physician’s employment is terminated without cause, they shall receive deferred compensation for services provided prior to termination, paid within 60 days.”

“Deferred compensation will be subject to IRS Section 409A requirements and must be paid in accordance with the designated schedule.”

Implications for Physicians

• Provides retirement income or additional earnings after leaving the practice.
• Can create tax advantages for both you and your employer.
• Deferred compensation may serve as a financial safety net during career transitions.

Negotiation Tips

• Ask for details on payment timing and conditions for payout.
• Clarify what happens to deferred compensation if the employer goes bankrupt.
• Ensure the contract specifies how disputes over deferred payments will be handled.

Red Flags and Pitfalls

• Unclear language may delay or deny payments.
• Some employers may forfeit deferred compensation if you violate non-compete terms.
• Unsecured deferred compensation arrangements may leave you at risk if the employer experiences financial instability.

Related Terms

• Equity Ownership
• Buy-Sell Agreement
• Bonus Structure
• Retirement Plan

FAQs

• “Can I lose my deferred compensation?”
  • Yes, particularly if your contract ties deferred compensation to restrictive covenants, or if you are terminated for cause.
• “Is deferred compensation taxed when it’s paid?”
  • Yes, deferred compensation is typically taxed as ordinary income in the year it is paid out.
• “What happens if my employer goes bankrupt?”
  • Unsecured deferred compensation may be lost in bankruptcy unless specific protections are included in your contract.