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Broad Definition Creates Potential Pitfalls for Employers

September 20, 2007
Related Topics: Finance/Taxes, Compensation Design and Communication, Miscellaneous Legal Issues, Featured Article, Benefits
The voluminous Treasury Department regulations issued in April cover nonqualified deferred compensation arrangements and also regulate compensation devices that many employers have not typically considered as deferred compensation. The penalty for noncompliance is a 20 percent additional tax (imposed on the employee) on the amount of deferred compensation, which includes income plus interest. Further, employers may be subject to withholding and reporting tax penalties. Here is what employers need to know.
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