In addition, the Chairman’s modification eliminates the provision that would have replaced Code Section 409A with a new Section 409B, which would have required payments under non-qualified deferred compensation plans to be taxed when they vested. Currently, Section 409A allows employees to defer taxation on such fully-vested payments, provided they meet other requirements under Section 409A. The proposed replacement of 409A with 409B would have had significant tax implications for those employees with non-qualified deferred compensation plans.
There is reason to be cautiously optimistic that the proposed Section 409B will not become law. The non-qualified deferred compensation changes were also removed from the House bill at the very last minute. The version of the bill that ultimately passed the House does not include a new Section 409B.
McDermott will continue to closely monitor these developments.