How to Actually Use Cardinal’s Deferred Comp Plan (A Planner’s Perspective)

The 2027 Cardinal Health Deferred Compensation Plan (DCP) enrollment window is open through November 24, 2026.

Now, I know many of you reading this aren’t at the VP level or above where DCP eligibility begins. If that’s you, treat this as a quick look behind the curtain at how executive benefits fit into a financial plan as your career progresses—or feel free to pass it along to a colleague who is eligible.

If you are eligible, Cardinal’s guides already lay out the rules. What they don't tell you is how to actually use the program as part of your bigger financial picture.

There is a reason companies offer deferred comp to executives in the first place: at the VP level and above, "just" maxing out your 401(k) is likely not enough to fund the retirement you’re targeting. Once your 401(k) is maxed out, the real planning question isn't whether to save more—it’s where those additional dollars should go: the DCP, a taxable brokerage account, or some combination of the two.

When I sit down with Cardinal clients to make that call, the right move usually falls into one of three buckets depending on where you are in your career.

1. The Baseline Play: Capture the "Free Money" Match

For most eligible clients, the starting point is simple: don't leave matching dollars on the table.

Cardinal matches up to 4% (when you defer 5% or more) on eligible pay between $360,000 and $460,000—up to $4,000 a year. Just remember one critical math rule: every dollar you put into the DCP reduces your 401(k)-eligible compensation. Make sure your DCP deferral doesn't accidentally pull your 401(k)-eligible pay below $360,000, or you’ll start losing 401(k) company match dollars in the process.

2. The Advanced Play: Deferred Comp "Stuffing"

For folks within a few years of retirement who have already built up healthy after-tax savings, may get much more aggressive—remember, Cardinal lets you defer up to 80% of your base salary and 80% of your MIP bonus.

A few years ago, a Cardinal client and I put together what I like to call a deferred comp "stuffing" strategy. In his final working years, we deferred the vast majority of his compensation into the DCP to shelter it from a 30%+ federal tax rate, while he supplemented his family’s day-to-day living expenses from his taxable brokerage account and cash savings.

Once he retired, he used a 10-year DCP payout schedule to cover the bulk of his living expenses—paying closer to a 20% effective federal tax rate on those distributions instead of 30%+. Better yet, that 10-year income bridge allowed him to delay Social Security and increase his eventual monthly benefit. (As a bonus, a qualifying payout of substantially equal installments over at least 10 years generally cannot be taxed by the state where you earned the compensation once you are no longer a resident there. That can make retirement in a state with no individual income tax even more attractive.)

3. When a Taxable Brokerage Account Wins: The Mid-Career & Job-Change Trap

Just because you can defer income doesn't always mean the DCP is the best place for your excess savings—especially if you are mid-career with a long runway ahead of you.

If you are likely to move into higher tax brackets through future Cardinal promotions, the tax benefit of deferring income today can become less compelling if those dollars are ultimately distributed when your tax rate is higher. Even worse: what if you leave Cardinal for a higher-paying role elsewhere?

Because leaving the company triggers your separation-from-service payout schedule, you could end up receiving a big new salary and DCP distributions at the same time—potentially pushing more of your income into higher tax brackets without the flexibility to simply pause the scheduled DCP payments.

In those cases, most of my VP-and-above clients still save aggressively beyond their 401(k)—they just route those extra dollars into a taxable brokerage account instead. You give up the upfront tax deferral, but you keep liquidity, control over when investments are sold, and the potential for favorable long-term capital gains treatment on appreciation. (And as we saw in the "stuffing" example above, building that taxable bucket early is actually what can give you the flexibility to go much heavier on deferred comp later in your career.)

A Quick Order-of-Operations Check

Before locking in your 2027 elections for the coming year, keep the sequence simple:

1. Max out your 401(k) and HSA first to take advantage of their tax benefits and stronger asset-protection features.
2. Capture the DCP match (up to $4,000 on pay between $360k and $460k), as long as the DCP makes sense within your broader plan.
3. Decide where the next dollar goes: taxable brokerage for greater mid-career flexibility, or heavier DCP deferrals as you enter the home stretch toward retirement.
4. Double-check your DCP beneficiary (it is completely separate from your 401(k)).

If you are eligible for 2027 and want a second set of eyes on how much to route into the DCP versus a taxable brokerage account—or how to structure your payout elections—just hit reply or grab a 30-minute spot on my calendar here before the November 24 deadline.

Schedule a 30-Minute Cardinal Q&A 

Take care and, as always, stay the course.