IRS Proposes Regulation on Nonqualified Deferred Compensation

At the end of last month, the Treasury Department issued highly anticipated proposed regulations (the "Proposed Regulations") under Section 409A of the Internal Revenue Code. Section 409A, which was signed into law in October 2004, makes sweeping changes to the federal tax laws governing nonqualified deferred compensation (including SERPs, stock options, and severance and golden parachute arrangements) and is forcing major changes to long-standing executive compensation practices. The Proposed Regulations provide guidance on a range of key issues and will now allow employers to more fully assess the impact of Section 409A on their compensation arrangements and develop compliance strategies.