New Federal Legislation Will Require Review of Deferred Compensation Plans

The nonqualified deferred compensation legislation that has been under consideration in Congress sporadically for several years is now a reality, pending the President’s expected signature. Generally effective as of January 1, 2005, the new legislation will result in sweeping changes to the taxation of nonqualified deferred compensation. Key elements of the new legislation, which will be found in a new Internal Revenue Code (Code) section 409A, are summarized in this LawFlash.

This LawFlash outlines:

• Definition of Nonqualified Deferred Compensation
• Timing of Elections
• Initial Elections
• Subsequent elections
• Distributions
• Acceleration of Payments
• Effective Date
• Material Modification
• Effect of a Violation
• Treasury Guidance
• FAQs

For the full story, please view the PDF.