March 22, 2004
BB 04—35

Nonqualified Deferred Comp Provisions Added to International Tax Bill in House

The Council has learned that as part of the ongoing revisions to the Senate version of the international tax bill (the Jumpstart Our Business Strength (JOBS) Act, S. 1637), the bill will include nonqualified deferred compensation provisions from the National Employee Saving and Trust Equity Guarantee Act (NESTEG). The nonqualified deferred compensation proposal in NESTEG is very similar to the proposal included in the House of Representatives' American Jobs Creation Act (H.R. 2896). However, the Senate nonqualified deferred compensation proposal also includes:

  • Elimination of the ability to defer gain on stock options and other employer security-based compensation;
  • Restrictions on investment control by the participant;
  • A repeal on the limitation on the ability of the Treasury Department to issue guidance with respect to the timing of taxation of deferred compensation;
  • A one year wait period for corporate insiders receiving a distribution as a result of a change in control; and
  • Limitations on the tax benefits of corporate owned life insurance.

There may be some tightening of the language to clarify the sections relating to the elimination of gain on stock options and other employer security-based compensation. However, the Council has been alerted that there will be a limited opportunity for change before the provisions are added to S. 1637.

The core deferred compensation proposals have been estimated to raise approximately $1 billion in tax revenue, making the provisions a substantial revenue-raiser for the legislation.

H.R. 2896 and S. 1637 are expected to be considered by the full chambers over the next several weeks. A side-by-side comparison chart of the various deferred compensation proposals, as included in pending legislation, is available on the Council Web site. Also available is a new set of talking points addressing deferred compensation legislation and equity-based awards to facilitate communication with your Senators and Representatives.

For more information, contact Diann Howland, Council vice president, retirement policy, or Lynn Dudley, Council vice president & senior counsel, at (202) 289-6700.


The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.