In addition to or in lieu of broad-based tax-qualified retirement plans, employers often provide select executives or groups of executives with nonqualified deferred compensation arrangements. (See
Second Opinion: New Tax Requirements for Nonqualified Deferred Compensation
The American Jobs Creation Act (the "Act") was passed by the House of Representatives on Oct. 7, 2004, and received final approval from the Senate on Oct. 11, 2004. President Bush was expected to sign the Act into law before the end of 2004. The Act enumerates an array of requirements intended to curb perceived abuses in the realm of executive compensation. In many ways, the thrust of the new requirements is to conform a number of aspects of the operation of nonqualified deferred compensation arrangements to those applicable to tax-qualified "401(k)" plans. Consequently, to be tax-effective under the new requirements of the Act, deferred compensation arrangements will need to operate in a fashion more akin to true retirement arrangements.
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