Exploring the Loan Feature of Deferred Compensation Plans

Many attorneys are not aware that if they defer fees into their deferred compensation plan, there is an option offered by the plan administrators to take a loan if they need access to capital.

For example, let’s assume an attorney has deferred $500,000 into his or her deferred compensation account. The attorney can then apply for a separately underwritten loan (the amount of the loan is generally up to 50% of the value of the funds in the deferred compensation account).

The interest rates on the loans from the deferred compensation plan administrators are usually much lower than bank lines of credit or the rates provided by traditional law firm lending companies.


If you have a deferred compensation plan established and you need money sooner than you expected (or if you want to take out a loan as a way to cover your personal living expenses without any income tax consequences), keep in mind that you may be able to get a loan from the deferred compensation plan administrators where you can access funds at reasonable interest rates.

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