By deferring taxation, wealth accumulation is maximized. Because of the power of compounding, the profit advantage can be several times the profit from investing on an after-tax, taxable basis.
There are myriad business purposes for deferring compensation.
Deferred compensation is not a tax shelter, but an agreement to defer the timing of taxation that benefits employers, service providers and the tax coffers.
The deferred compensation advantage increases as tax rates increase.