Nonqualified Deferred Compensation Plans Key for High Earners

Two payroll professionals discussed compliance tips for federal reporting and taxation of nonqualified deferred compensation plans at the 41st Payroll Congress.

Nonqualified deferred compensation plans, governed under Internal Revenue Code section 409A, are elective plans that allow employees to defer compensation from one year to another, said Jim Medlock, a payroll compliance educator with Medlock & Associates, “If it’s paid in the same year, it’s not deferred compensation.”

Among the guidance was a warning to employers of the risks associated with a failure to comply with the requirements of section 409A, which can lead to employees receiving a large tax ...