Article Abstract:
Nonqualified deferred compensation plans have revived in popularity, largely because the 1993 tax law reduced the compensation cap for qualified retirement plans while boosting the highest federal tax bracket from 31 to 39.4%. Nonqualified plans are subject to fewer rules and are taxed differently than qualified plans. Under nonqualified plans, the employer can include only those employees it chooses and whose income is not taxed until it is received. The prime advantage of nonqualified plans is their flexibility.
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Article Abstract:
Treasury issued final regulations on May 29, 1992 which should alleviate the obstacles to the implementation of deferred compensation plans allowing a business to retain its S corporation status. These regulations specify that deferred compensation plans will not be considered to violate IRC 1361(b)(1)(D)'s one class of stock requirement for S corporations. Planning still needs to be cautious in order not to jeopardize shareholder-employees' opportunities for a valid deferral with income tax advantage.
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Article Abstract:
Golden parachutes are often part of an executive compensation plan, but the payor forfeiture of tax deductibility as well as the nondeductible excise tax applied to excess parachute payments make it essential to understand the tax consequences in advance. IRC 280G, 4999, 275(a)(6) and 3121(v)(2) are the code sections which apply. Treasury regulations implementing IRC 280G were published in 1989. Problems the regulations do not address are listed and briefly discussed.
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