Members of the House Ways and Means Committee are now ”marking up,” or debating revisions to, a new version H.R. 1, the big Republican tax bill.
One section of the Tax Cuts and Jobs Act bill, which starts on page 293 of the PDF and runs to page 310, deals with executive compensation, including nonqualified deferred compensation packages.
You can read those sections of the current draft of the bill online, here.
A “nonqualified deferred compensation” arrangement is solution for top corporate executives and other high earners who make too much for a 401(k) plan, health savings account or other saving arrangement that qualifies for special tax breaks to offer much tax-saving help.
In many cases, those high earners have been using stock options and stock appreciation rights to put off collecting some of their compensation, and paying income taxes on that compensation, to a later date.
The current version of H.R. 1 would replace one of the main sections of the Internal Revenue Code that governs nonqualified deferred comp packages, IRC Section 409A, with a new law, IRC Section 409B.
A team at Crowell & Moring, a law firm, concludes in a commentary that Section 409B would, in effect, eliminate the current version of the IRC Section 409B proposal could eliminate the tax advantages now associated with nonqualified deferred comp programs that depend on stock options, stock appreciation rights and similar arrangements. “If Section 409B is enacted, companies will need to review and likely amend those plans,” the team writes.
If that proposed change sticks, how might it affect agents and planners who are involved with executive compensation planning?
For three ideas, read on.
1. Executive comp clients would need extra help.
Anyone who was part of a team that set up a nonqualified deferred comp arrangement might be grateful for any legal advisors who thought to put warnings about the uncertainty of tax law, and provisions for coping with changes in tax laws, in the arrangement documents.