Subsidiaries participating in deferred compensation plan of Parent

[k man]

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.

[Guest hank]

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.

[M R Bernardin]

Search IRS announcements, etc. for about the past six months or so. There was some guidance about who would be the settlor and whether contributions would be considered distributions, I think. May not be applicable but worth checking out.

[k man]

after some further research i agree that it is pretty straight forward. the plan document already provides for subsidiaries and i see the issues being more corporate taxation and balance sheet than anything else.

[Guest hank]

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.