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Change of Plan?

New tax laws require a new look at deferred compensation plans.

By Joan Szabo

Opinions expressed by Entrepreneur contributors are their own.

A new federal law governing deferred compensation plans couldmean substantially higher taxes and penalties if companies andtheir employees aren't paying attention.

The American Jobs Creation Act of 2004 dramatically changedthese types of plans, which businesses use to retain and reward keyemployees. With nonqualified deferred compensation plans, businessowners promise to pay employees a sum of money at a future date.The new law defines plans so broadly that it applies not only totraditional plans, but also to equity-based plans, such asdiscounted stock options, stock appreciation rights and phantomstock plans.

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