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Subsidiaries participating in deferred compensation plan of Parent


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We represent a client that is a U.S. based subsidiary of an international holding company. the US company also has several subsidiaries. The US company currently sponsors a non-qualified deferred compensation plan. They would like to expand the scope of the plan and allow some executives from other subsidiaries in to the plan.

What issues does this raise in light of the fact that the contolled group rules in the code are not applicable?

Can this be as simple as amending the plan so that it is open to the executives of the other companies?

any information would be helpful.

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I think it's relatively straightforward, assuming that the plan will (after adding the new execs) still satisfy the usual tests for select group of management/key/highly compensated employees. Qualified plan controlled group rules don't apply (although there may be some consolidated return tax accounting issues requiring some thought). Amend the plan to allow its adoption by the US subs, then have the subs adopt by resolution. Alternatively, I suppose, the plan's definition of "Employer" or "Sponsor" or "Participating Employer" could be ameded to list all of the subs that want to participate. The first seems preferable to me if only so that further amendment isn't necessary every time a new sub decides it want to join in the fun.

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M R B is right about the recent IRS guidance, which I forgot about in my last post. It was Notice 2000-56, and I think it was in mid to late October.

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