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New Restrictions on Nonqualified Deferred Compensation: The Effect of the American Jobs Creation Act of 2004

February 4, 2005

The American Jobs Creation Act of 2004, P.L. 108-357, signed into law by President Bush on October 22, 2004, adds a new section to the Internal Revenue Code, Section 409A, which imposes significant limitations on the design of nonqualified deferred compensation arrangements. Section 409A generally applies to compensation deferred after December 31, 2004 (see the "Effective Date" section below for more details). The primary focus of these new limitations is on the time of the election to defer, the time of payment, and the ability to modify the time of payment.

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