The IRS and Treasury today issued proposed regulations governing non-qualified deferred compensation plans.
Here are the highlights:
- employees cashing out early must withdraw entire amount
- early withdrawals subject to interest and additional 20% tax
- stock appreciation rights (“SARs”) exempt if granted at fair market value
- broad-based plans of non-U.S. companies operating in U.S. are exempt
- severance for fired employees capped at 2x annual salary
- maximum severance of $420,000 (indexed for inflation)
- deadline for compliance extended until 12/31/06
- effective date for regulations is 1/1/07
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