June 23, 2004
In this issue:
- Timing Uncertain for House-Senate Conference on Deferred Compensation Legislation
Timing Uncertain for House-Senate Conference on Deferred Compensation Legislation
The timing for a congressional conference to reconcile the differences in the House of Representatives- and Senate-passed versions of the international tax bills (the American Jobs Creation Act (H.R. 4520) and the Jumpstart Our Business Strength Act (S. 1637)) remains uncertain. Both bills include provisions requiring significant changes to current deferred compensation practices, raising approximately $800 million over a 10 year period.
Neither the House nor the Senate have appointed conferees. Congressional staff have indicated that the conference may be delayed because Senate Democrats are seeking assurances regarding their role during the conference. When an agreement is reached, the conference could be scheduled very quickly.
The two bills are very similar. The Senate bill includes two proposals not in the House bill that raise major concerns:
- One provision would eliminate the ability of individuals to defer gain on stock options and other employer security-based compensation including deferred stock units and restricted stock units.
- Another provision would limit the available "investment" options in a nonqualified deferred compensation plan maintained for crediting earnings to investments that are comparable to investments available in the qualified deferred compensation plan maintained by the employer with the fewest investment options.
Both bills raise several additional concerns including the effective date (deferrals after June 3, 2004 in H.R. 4520 and deferrals after December 31, 2004 in S. 1637), the expansive definition of "deferred compensation plan," the required timing of elections to defer so that they would have to be made in the taxable year prior to the taxable year in which the services are first performed (the House report language indicates that relief may be provided to long-term incentive arrangements), and the possibility that a change in the distribution option selected for amounts deferred prior to the effective date will result in those amounts being treated as new deferrals after the effective date and subject to the new rules. A side-by-side review of both bills' deferred compensation proposals, prepared for the Council by Groom Law Group, is available on the Council Web site.
Your input to Congress is critical to getting these concerns addressed in the House/Senate conference negotiations. Several "talking point" documents prepared by the Council are also available to facilitate your communication with Senators and Representatives. These include:
- Talking Points on Deferred Compensation Proposals
- Nonqualified Deferred Compensation Legislation Harmful to Supplemental Pensions
- Nonqualified Deferred Compensation Legislation General Talking Points
- Nonqualified Deferred Compensation Legislation Senate Provisions on Stock Option Gain
For more information, contact Lynn Dudley, Council vice president and 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.