Planning Should Begin Now to Prepare For Changes to Nonqualified Deferred Compensation Arrangements Under Legislative Proposals

Both the Senate and the House have passed proposed legislation that would significantly impact the taxation of nonqualified deferred compensation arrangements under the Internal Revenue Code of 1986, as amended (the Code). The Senate passed S. 1637, the "Jumpstart Our Business Strength (JOBS) Act of 2004" on May 11, 2004 and the House approved H.R. 4520, the "American Jobs Creation Act of 2004" on June 17, 2004. The deferred compensation proposals in both bills are similar in most respects. There are a few significant differences, however, that must be reconciled in conference before any legislation is enacted. Consequently, some of the proposals discussed in this Alert may be changed or eliminated from the final version of the legislation. Also, Treasury regulations issued after the legislation is enacted could have a material effect on the impact of the new rules.