Deferred Compensation: Preparing for the Changes


The American Jobs Creation Act of 2004 (the “Act”) made sweeping changes to non-qualified deferred compensation earned or vested after December 31, 2004.  The Act’s reach is not limited to employees making elective deferrals under non-qualified deferred compensation plans.  Because the Act does not define what constitutes a “deferral” it is broad enough to reach employer only contribution plans.  The Act only excepts from its reach qualified employer plans (such as 401(a) plans, 403(b) plans or 401(k) plans) or bona fide vacation leave, sick leave, compensatory time, disability pay or death benefit plans.

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