Abstract
The complex rules governing the taxation of deferred compensation are complicated. This article provides an overview of the treatment of nonqualified deferred compensation under Sections 409A and 457 of the Internal Revenue Code of 1986, as amended (the Code). It provides background information about nonqualified deferred compensation plans generally and the enactment of Code Section 409A. The related interpretive guidance issued by the Internal Revenue Service is also described. The general requirements under Section 409A for nonqualified deferred compensation plans are discussed, and the various types of arrangements that are excluded from coverage by these rules are described.The article also provides an overview of Code Section 457, and its application to 457(f) plans and 457(b) plans maintained by governmental employers and tax-exempt organizations.
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