Jump Start On Deferrals

[Christine Roberts]

An employer would like to establish a nonqualified deferred comp. plan for an executive, with a 10% of annual comp. deferral. However the employer would like to allow for an additional deferral of a "bonus" in the first year of the plan, in recognition of the executive's prior service to the company. Provided that the deferral election is in place prior to receipt of the bonus and the bonus is subject to the withdrawal conditions that apply to regular deferrals (i.e., term. of employment, death, disability, etc.) does this pose a problem?

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[Guest bswift]

crintine, the deferral of "compensation" under the plan should be broad enough to cover both base salary and bonuses. If not, the plan could probably be amended to so provide. Is the bonus for ye 1999 or some other period? the question of when is it too late to defer is a tough on, but remember that the IRS has lost almost every case its ever brought against taxpayers. If want to be aggresive, you could elect to defer compensation that has not yet been paid or determined (in the case of a bonus) even though the employee is electing to defer payment for a period that has already begun (i.e. 1999). hope that helps.