Nike Deferred Compensation

Avier Wealth Advisors is not affiliated with Nike. While Avier communicates with its clients regarding their Nike employee benefits, and educates itself on the Nike Benefits, there is no guarantee that the information we have provided is accurate. Nike employees are encouraged to contact their employer should they have any questions regarding their specific employee benefits.

What is the Nike Deferred Compensation Plan?

The Nike Deferred Compensation Plan is available to employees who earn a base salary of $150,000 or more. This exclusive benefit can help you reduce your tax bill by thousands.

Important Deferred Compensation Considerations

Eligible Nike employees can enroll in the deferred comp plan during open enrollment.  During this time, you decide how much income you want to defer:

During this time, you decide how much income you want to defer:

  • Up to 75% of next year’s base salary
  • Up to 100% of the following year’s PSP bonus

Defer up to 75% of next year’s base salary

Defer up to 100% of the following year’s PSP bonus

If you’re eligible for Nike deferred compensation you have the potential to reduce your tax bill by thousands. It’s a complex benefit that requires a significant amount of planning.

Schedule a 30-minute call to learn about:

  • Strategies for reducing your taxable income
  • Ensuring adequate cashflow to cover monthly expenses
  • Developing a comprehensive payout strategy

Use the Nike Deferred Comp Plan to Reduce Your Tax Bill

The most efficient way to reduce the amount of income tax you pay is to control the amount of income you earn annually. At Nike, your compensation comes in a few different forms: your salary, PSP bonus, and RSUs or stock options

With deferred comp you can control how much income you receive from your salary and bonus. This can help reduce your total taxable income.

Nike Deferred Compensation Example

The best way to illustrate how you can reduce taxes is with an example. In this scenario, our example Nike employee is under 50 years old, and earns the following:

  • Base salary: $300,000
  • PSP annual bonus: $75,000
  • Vesting Nike stock: $100,000

If our example employee received all this income in a single year, they would be taxed in one of the highest income brackets. This employee decides to defer some of their compensation to lower their tax bill.

Our example employee reduces some of their income by maxing out their 401(k) and contributing $22,500. They also decide to utilize the deferred comp plan to defer an additional $150,000 between salary and their PSP bonus. This is where they begin to see the true tax reducing power of deferred comp.

By deferring $150,000, our example employee can reduce their annual compensation considerably. The decision to defer some of their income can help reduce their annual tax bill by thousands.

    Key Differences Between Deferred Comp and Your 401(k)

    Deferred Compensation is an opportunity to save and invest dollars on a pre-tax basis, similar to your 401(k). Contributions to deferred comp reduce taxable income in the year of the deferral. This income can be invested and accessed later in retirement, presumably when you are in a lower tax bracket.

    There are some key differences between the 2 plans to be aware of:

    DECISION TO CONTRIBUTE You can contribute at any time. Available one time a year during open enrollment.
    CHANGE YOUR DECISION Changes to your 401(k) contributions can be made at any time. Deferrals are irrevocable once the enrollment period ends.
    CONSUMER PROTECTION The money you invest in your 401(k) is governed by a federal law known as ERISA. In the unlikely event that Nike would go bankrupt, the funds in your deferred comp plan become an unsecured liability of the company.
    PAYOUT OF FUNDS You can receive the funds out of your 401(k) at any time. You must set your DCP distributions at the time you make your election. Changes are subject to IRS rules.

    In 2023 you can contribute:

    • $22,500 if you are under 50
    • $30,000 if you are 50 or older
    You can defer up to 75% of your salary and up to 100% of your PSP bonus.

    Decide How Much Income to Defer

    Proper long-term planning can help you avoid an unexpected tax bill in the future.

    Make sure you are fully funding all your other pre-tax accounts (Nike 401(k), HSA) before deferring any of your income within a deferred compensation plan. Don’t forget about the Nike Mega Backdoor Roth provision within your 401(k), you’ll want to consider leveraging that as well.

    Manage Your Cashflow for Monthly Expenses

    Your Nike RSUs vest multiple times per year and typically vary in amount each vest.

    When RSUs vest, they are treated as income and are taxed, regardless of if you sell or hold on to the shares.  Many employees hold on to their vested shares thinking it is better to save them for future needs. We recommend you flip this type of thinking.

    You can sell your RSUs when they vest and use the proceeds to supplement your cashflow needs.

    There are a few benefits associated with this strategy. First, it helps you maintain a more diversified portfolio. Second, when you sell your RSUs you can defer more income from your salary and bonus – which can help reduce your tax bill.

    Establish Your Deferred Comp Distributions

    The Nike deferred comp plan is different than your 401(k), where you’re able to withdraw money early (with penalty) or wait until retirement to withdraw funds.

    You need to decide when you want to receive your distribution every time you make a deferral. You need a plan to help ensure your money comes out on time, at the right time, and in amounts that make sense for you.

    Every time you receive a distribution you are taxed, so you’ll want to factor in additional sources of income you may receive during retirement and the timing.

    Future sources of income include Social Security, consulting or part-time work, distributions from your 401(k) and IRA, as well required minimum distributions (RMDs).

    Schedule a 30-minute call to learn about:

    • Strategies for reducing your taxable income
    • Ensuring adequate cashflow to cover monthly expenses
    • Developing a comprehensive payout strategy


    Focused on your needs, we provide comprehensive financial planning and investment advisory strategies for individuals and families. We’d love to hear from you.