Taxable Benefit in 2004?

[Guest code_surfer]

I know there have been some changes to deferred comp plans this year, but I thought it went into effect next year...

My spouse works for a foriegn company here in the US. There is a deferred comp plan for management in addition to the 401k they sponsor. My spouse has deferred his bonus to the deferred comp plan for 3 years, and is 100% vested in the first 2 years of contributions.

In December a mysterious entry showed up on his pay stub indicating that about 1/3 of what he is vested in (in the deferred comp plan) is taxable income!!!!

Does this sound right???

What about withholding? It is enough to possibly cause us to be under withheld.

Where can I get some easy to read info on this?

Thanks!

[E as in ERISA]

Is it a 457(f) plan? Taxable upon vesting?

[mbozek]

Your spouse needs to retain tax counsel or talk to the HR/comp people at the employer to determine what type of deferred comp plan is he particpating in. If he works for a profit making employer then the terms of the plan control when funds are taxable. It is possible that the plan is a form of deferred bonus progam that pays benefits after 3 years. Payments from non qualified deferred comp plans are subject to wage withholding. It is unlikely that he would be eligible for an 457(f) plan which is only available to employees of a Non profit employer because he works for a foreign corp.