HEALTH NET, INC. DEFERRED COMPENSATION PLAN

EXHIBIT 10.18

HEALTH NET, INC.

DEFERRED COMPENSATION PLAN

(as amended and restated effective January 1, 2004)

I. INTRODUCTION

The purpose of the Health Net, Inc. Deferred Compensation Plan (the “Plan”) is to permit certain key employees of Health Net, Inc., a Delaware corporation (the “Company”), and certain of its subsidiaries to defer receipt of compensation payable to such employees until such times as set forth herein.

II. DEFINITIONS

For purposes of the Plan, the following capitalized terms shall have the meanings set forth in this Article.

2.1 “Account” shall mean the account kept on the books and records of the Company established on behalf of a Participant in the Plan to which amounts deferred by such Participant (and deemed earnings and losses thereon), other than amounts credited to the Participant’s In-Service Withdrawal Account, are credited.

2.2 “Beneficiary” shall mean the beneficiary or beneficiaries (including any contingent beneficiary) designated pursuant to Section 4.5, except that the beneficiary or beneficiaries entitled to amounts credited to the subaccounts of an Eligible Employee’s Former Account shall be the beneficiary or beneficiaries as designated pursuant to The Health Net Executive Deferral Plan and The Health Net Supplemental Credit Plan (such plans terminated effective as of December 31, 2000), unless a change to such a beneficiary is made pursuant to Section 4.5 hereof.

2.3 “Board” shall mean the Board of Directors of the Company.

2.4 “Code” shall mean the Internal Revenue Code of 1986, as amended.

2.5 “Committee” shall mean the Compensation and Stock Option Committee of the Board.

2.6 “Common Stock” shall mean the Class A Common Stock, $.001 par value, of the Company.

2.7 “Company” shall mean Health Net, Inc. (formerly known as Foundation Health Systems, Inc.), a Delaware corporation, or any successor thereto.

2.8 “Compensation” shall mean the total earnings paid by an Employer to an Eligible Employee and properly reportable on IRS Form W-2 for a Deferral Year (including bonuses and overtime), and all amounts not includible in such Eligible Employee’s gross income for federal

income tax purposes solely on account of his or her election to have compensation reduced pursuant to the Plan, a qualified cash or deferred arrangement described in Section 401(k) of the Code or a cafeteria plan as defined in Section 125 of the Code, but excluding any reimbursements or other allowances for automobile, relocation, travel or education expenses (even if includible in the Eligible Employee’s gross income for federal income tax purposes).

2.9 “Deferral Year” shall mean the twelve-month period beginning each January 1, except that the first Deferral Year shall be the eight-month period beginning on May 1, 1998.

2.10 “Disability” shall mean a disability within the meaning of the long-term disability plan maintained by the Employer of an Eligible Employee, pursuant to which such Eligible Employee is receiving long-term disability benefits.

2.11 “Eligible Employee” shall mean an individual (i) who is treated by an Employer as its employee, (ii) whose employment position is categorized as “director-level” or above, and (iii) whose annual base rate of salary for a Deferral Year is at least $100,000 (or such other amount determined by the Company from time to time) as of the first day of such Deferral Year.

2.12 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

2.13 “Effective Date” shall mean May 1, 1998.

2.14 “Employer” shall mean the Company or a Subsidiary, other than a Subsidiary that the Committee excludes from participation in the Plan.

2.15 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

2.16 “Former Account” shall mean an account kept on the books and records of the Company established on behalf of an Eligible Employee to which shall be credited the following: (i) amounts equal to the benefits earned by such Eligible Employee as of December 31, 2000 (the “Plan Termination Date”) under The Health Net Executive Deferral Plan (the “Deferral Plan”) and The Health Net Supplemental Credit Plan (the “Supplemental Credit Plan”) and (ii) deemed earnings and losses on such amounts after the Plan Termination Date. An Eligible Employee’s Former Account shall consist of two subaccounts, i.e. , (x) a Deferral Plan Subaccount, to which shall be credited such Eligible Employee’s benefit under the Deferral Plan as of the Plan Termination Date, and deemed earnings and losses thereon after the Plan Termination Date, and (y) a Supplemental Credit Plan Subaccount, to which shall be credited such Eligible Employee’s benefit under the Supplemental Credit Plan as of the Plan Termination Date, and deemed earnings and losses thereon after the Plan Termination Date.

2.17 “In-Service Withdrawal Account” shall mean the account kept on the books and records of the Company established on behalf of a Participant to which amounts deferred by such Participant pursuant to Section 3.2(f) shall be paid in a lump sum at the time described in Section 4.1(b).

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2.18 “In-Service Withdrawal Year” shall mean the calendar year designated by a Participant on his or her deferral election form filed pursuant to Section 3.2(f), which year begins at least three years after the year in respect of which the Participant has filed such election form.

2.19 “Investment Fund” shall mean an “open-end,” “closed-end” or other collective investment fund selected by the Company from time to time as a measure for allocating deemed investment gains and losses to Participants’ accounts.

2.20 “Merger” shall mean any merger of the Company in which the holders of the Class A common stock, $.001 par value, of the Company immediately prior to the merger have the same proportionate ownership of common stock of the surviving or resulting parent corporation immediately after the merger.

2.21 “Participant” shall mean an Eligible Employee who has elected to defer, pursuant to the terms of the Plan, an amount that would otherwise be payable as Compensation in a Deferral Year.

2.22 “Payment Date” shall mean the date chosen by the Company, in its sole discretion, that occurs within the 90-day period beginning immediately after the last day of a calendar year.

2.23 “Regular Compensation” shall mean an Eligible Employee’s Compensation for a Deferral Year, excluding any bonuses payable to such Eligible Employee during, or with respect to, such Deferral Year.

2.24 “Subsidiary” shall mean any corporation other than the Company in an unbroken chain of corporations beginning with the Company if, at the time of reference, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

III. PARTICIPATION AND DEFERRALS

(a) In General . Each Eligible Employee may participate in the Plan in a Deferral Year by specifying on an election form filed with the Company prior to the beginning of such Deferral Year the percentage of Compensation for the Deferral Year to be deducted from such Compensation and deferred for payment at a later date pursuant to the Plan. The Company shall establish rules and procedures prescribing the time and manner in which election forms shall be filed with the Company.

(b) Initial Participation . An individual may participate in the Plan during the first Deferral Year in which the individual begins employment with an Employer, provided that on the individual’s date of hire he or she satisfies the conditions set forth in clauses (i) and (ii) of the definition of “Eligible Employee” and his or her annual base rate of salary for such Deferral Year is at least $100,000. To participate in the Plan, such individual must file a deferral election form with the Company within 30 days of his or her date of hire (hereinafter, such individual is referred to as an “Eligible Employee”).

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(a) In General . Except as provided in Section 3.1(b), a deferral election form must be filed in accordance with rules and procedures prescribed by the Company prior to the Deferral Year for which the election is to be effective. A Participant may not revoke or change a deferral election for a Deferral Year after the beginning of such year. A Participant must file a new election form with the Company prior to each Deferral Year for which the election is to be effective. In no event shall an election under the Plan apply to Compensation earned prior to the date on which the election to participate in the Plan for a Deferral Year is received by the Company.

(b) Deferral Amount . An Eligible Employee may elect on the election form (in the time and manner designated by the Company) to defer the receipt of (i) between 5% and 90% of the amount that would otherwise be the Eligible Employee’s Regular Compensation for a Deferral Year, (ii) between 5% and 100% of any bonus payable to such Eligible Employee during, or with respect to, the Deferral Year or (iii) any combination of such percentages described in clauses (i) and (ii).

(c) Deemed Investment Election . Upon the commencement of participation in the Plan, each Participant shall specify on his or her election form any one or more of the Investment Funds in which all of the Participant’s accounts under the Plan are to be deemed invested.

(d) Change of Deemed Investment Election . A Participant may elect to change his or her deemed investment election as frequently as may be designated by the Company, and in any event at least quarterly. Any such change shall specify the whole percentages (or amounts if so permitted by the Company) to be deemed invested in one or more of the then available Investment Funds. A Participant may change his or her election (i) with respect to the balance of his or her account(s) as of the effective date of the Participant’s new investment election, (ii) with respect to future amounts credited to the Participant’s account(s) under Section 3.3(a) and (b) or (iii) both. A Participant’s change of a deemed investment election must be made in accordance with the written rules and conditions provided by the Company to the Participants.

(e) Payment Election . Except as provided in subsection (f) of this Section 3.2, an Eligible Employee must designate on each deferral election form filed with the Company (i) a manner of payment in which his or her Account shall be paid, provided that such manner of payment is permitted under Section 4.2, and (ii) whether the Account is to be paid on the Payment Date occurring immediately after (x) the calendar year in which the Eligible Employee terminates employment with the Employer, or (y) the calendar year immediately following the calendar year in which such employment terminates. The Participant’s election on the deferral election form most recently filed with the Company shall supercede the Participant’s election on all previously filed deferral election forms with respect to the payment of the Participant’s Account, provided that the most recent election form has been on file with the Company for at least twelve (12) months.

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(f) In-Service Withdrawals . A Participant may elect for any Deferral Year on a deferral election form filed with the Company (i) to designate any percentage of the amount to be deferred to be credited to an In-Service Withdrawal Account established on behalf of the Participant and (ii) to receive payment of the balance of such In-Service Withdrawal Account in a lump-sum within 90 days after the last day of the In-Service Withdrawal Year so designated by the Participant.

(a) Crediting Deferred Compensation . Any amount otherwise payable as Compensation that is deferred by a Participant hereunder shall be credited to the applicable account of the Participant as of the date on which, absent such election, such amount would have been payable to the Participant as Compensation.

(b) Earnings . Each Participant’s account(s) under the Plan shall be credited with deemed earnings, or reduced by deemed losses, equal to the earnings or losses that would