An Overview of Nike’s Deferred Compensation Plan

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NEW: 10 Must-Dos to Take Advantage of Your Nike Benefits

By Karen Harris, CFP®

Deferred compensation (DC) plans are designed to provide tax and retirement benefits to attract and retain top talent. Nike uses a DC plan which is mainly funded by participant contributions, but it may also include profit-sharing makeup employer contributions. When an employee contributes, they can delay a portion of their income tax liability to future years through deferring salary, bonus, and even long-term incentive payments.

Once a year, typically around the beginning of November, select high-earners can elect the percentage they want to contribute to the plan for the upcoming year and determine a payout schedule. The contribution percentage ranges from 1-100 percent, and the payout schedule ranges from a lump-sum distribution to 5, 10, or 15 years of quarterly disbursements. Each time a participant submits a new deferral election, they may select a different dispersal method as well.

Nike Benefits Series

Under certain circumstances, you can change the distribution election to a lump sum, 5 or 10 years. Note that a 15-year distribution is only available as an initial election.

Why might you use the Nike deferred compensation plan?

Many who qualify to participate in the plan find themselves in a higher tax bracket. By having an option that allows deferral of income, participants may be able to reduce their tax liability over time. In the best-case scenario, an individual contributes a percentage of their income to reduce their effective tax rate, and they experience retirement after their time at Nike. The goal is to be in a lower tax bracket for the foreseeable future. By having deferred compensation income coming in, it may allow an individual to delay Social Security or retirement plan benefits.

Let’s consider an example:

Jennifer is 40 years old and working at Nike as a senior director. She earns $275,000 annually. Her current goal is to retire at age 55 and delay taking both Social Security and retirement plan distributions until age 70. Jennifer is deferring 32 percent of her income ($88,000) contributed over 15 years, with a 15-year distribution schedule.

At the time of retirement, assuming growth of 7 percent annually, Jennifer’s plan has grown to roughly $2.2 million. When distributed over 15 years, the funds will replace the majority of the income she was receiving in her working years.

In Jennifer’s scenario, as you can see below, $275.000 of ordinary income would put an individual in the 35 percent tax bracket. By contributing 32 percent to Nike’s DC plan and maxing out contributions to Nike’s 401(k), Jennifer can quickly reduce her tax bracket to 24 percent, evening out her tax liability over time.

Tax Brackets Single Married, Filing Jointly
10% $0-$9,700 $0-$19,400
12% $9,701-$39,475 $19,401-$78,950
22% $39,476- $84,200 $78,951-$168,400
24% $84,201-$160,725 $168,401-$321,450
32% $160,726-$204,100 $321,451- $408,200
35% $204,101-$510,300 $408,201-$612,350
37% Over $510,301 Over $612,351


Sometimes, a deferred compensation plan doesn’t make sense and can increase a participant’s effective tax liability if the strategy doesn’t go as planned. Here are some common issues:

Overcontributing: Take the same situation as above, but imagine that Jennifer had opted to contribute half of her salary for 20 years before retiring at age 60. Her DC plan grew to approximately $5.6 million and is distributed over 10 years, putting her in the highest tax bracket.

Employment changes: By switching jobs, the participant initiates the plan distribution schedule. If they are earning the same amount or more at a new company, and piling on the DC income, the tax benefit quickly becomes a tax consequence.

Putting too many eggs in one basket: Employees can utilize this tax-deferred strategy because DC plans are exempt from most retirement plan requirements and regulations. The participant does not own the DC plan, which is essentially an unsecured promise to make future payments.

While we expect to see Nike thriving in the future, if something were to change and Nike were to become insolvent, the plan may have insufficient funds to make payments to participants. Benefits are dependent on the long-term financial stability of the company.

Future tax rates: There will always be unknowns, and future tax rates is potentially a big one. Tax rates have been at historically low levels over the past three decades. Deferring taxes may mean a higher tax rate down the road due to changes in tax law or your situation.

Key questions to consider

Take time to answer the following questions before setting up your deferred compensation plan:

  • How long do you plan to stay at Nike?
  • When can you and when do you want to retire?
  • What income tax bracket are you currently in?
  • Which part of your income might make the most sense to defer?
  • What income will you have in retirement? Don’t forget the required minimum distributions from tax-deferred plans (i.e., 401(k) or IRA).
  • How do you feel about a portion of your assets at risk and dependent on Nike’s financial stability?

Getting help with your Nike deferred compensation plan

Brighton Jones is here and ready to help Nike team members think about these questions and more. We are happy to discuss your current situation, goals, and any additional questions you have. Schedule time with our team to better understand the full costs and benefits of the Nike deferred compensation plan so you can leverage your portfolio options and avoid tax surprises.

Note that this article focuses on post-2005 account balances. Different rules may apply to contributions made prior to 2005. 

Karen Harris, CFP® serves as an advisor at Brighton Jones.

NEW: 10 Must-Dos to Take Advantage of Your Nike Benefits

The information included here is based solely on the knowledge of Brighton Jones financial advisors, and does not represent the views or advice of Nike. Nike did not contribute, review, or approve this content.


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