DEFERRED COMPENSATION RULES UNDERGO SWEEPING CHANGES

In response to alleged scandalous behavior in corporate board and executive rooms, Congress has enacted sweeping tax legislation governing most deferred compensation and many executive compensation arrangements. The legislation will significantly impact tax-exempt and governmental entities sponsoring certain types of deferred compensation. Among arrangements affected by this legislation are executive salary deferral, elective bonus deferral, supplemental executive retirement, excess benefit, deferred severance, so-called tax-exempt "option" plans, and deferred compensation (including deferred bonus) plans for key and non-key employees. In the tax-exempt and governmental sectors, many of these plans are known as Section 457(f) plans, or "ineligible" deferred compensation plans. Escaping the dragnet are "eligible" deferred compensation plans under Section 457(b), Section 403(b) tax-deferred annuities, Section 415(m) qualified governmental excess benefit plans, and Section 401(a) tax-qualified retirement plans. Bona fide vacation, leave, sick leave, compensatory time, disability pay, and death benefit plans are also exempted.