The government hasn’t required much in the way of compliance when it comes to nonqualified deferred compensation, such as special executive retirement perks and bonuses.
That changed in April, when Congress enacted a slew of IRS-enforced regulations known as 409A. Beginning Jan. 1, 2008, you'll have to comply with the broad new regs, or the beneficiaries—your executives—could face stiff tax penalties. Blame Enron’s collapse for Congress’s renewed interest in the issue.
(The IRS originally set a deadline of Dec. 31, 2007 for bringing deferred-compensation documents into compliance. But this month, the IRS pushed that document compliance deadline back one year to Dec. 31, 2008. Employers do still need to begin complying with the new regulations on Jan. 1, 2008.)
Working definition: If you promise a payment now that won’t be paid out until a future year, that’s nonqualified deferred compensation.
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