New Tax Law Will Require Substantial Changes to Many Non-Qualified Deferred Compensation Arrangements

Originally published October 19, 2004

By Marian Tse, Matt Giuliani, Dan Condon, Scott Webster and Kris Wardwell

Employers must take immediate action to review closely – and in many cases revise substantially – their non-qualified deferred compensation arrangements that cover employees or directors (or other independent contractors such as consultants), in light of new legislation (known as the American Jobs Creation Act) that has been approved by Congress. It is expected that the President will sign this legislation, although at this time it is unclear when that will occur. The new non-qualified deferred compensation rules established by this legislation generally will become effective January 1, 2005, and in some circumstances will apply to deferred compensation earned before that date.