Deferred Compensation Pay Regulations May 1st, 2007
“Executives and other highly compensated employees can breathe a sigh of relief now that the Treasury Department has released its deferred-compensation regulations,” writes Theo Francis of The Wall Street Journal online.
The newly approved regulations will allow executives who defer their compensation to continue to enjoy tax breaks without facing additional restrictions beyond existing ones.
Deferred-compensation plans, which are nearly universal at large U.S. companies, broadly let highly paid employees put off receiving some or all of their pay until they leave their job or retire. Plans typically pay interest or investment returns, and some match executive deferrals. Tax on the income is only paid when it is received.
To enjoy this tax benefit, the money must not be received or controlled by the executive, which is why money taken early is typically subject to a penalty, plus taxes.
The new regulations make it easier for executives to collect severance without triggering the restrictions in the deferred-compensation law, explains Francis.
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