What is a Salary Deferral Arrangement?
A Salary Deferral Arrangement is an arrangement whereby a plan participant can choose to receive their pay in cash or to have a portion of their pay contributed to their employer’s qualified 401(k) plan. In electing to defer a portion of your pay, Federal Taxes and certain State’s taxes on the deferred amounts (and earnings on those amounts) are deferred until such time as you actually receive a cash distribution of your account balance. However, these taxes can be further deferred by rolling over the distributed account balance to an IRA or to another qualified retirement plan in which you have become a participant, rather than taking the distribution in cash.