The recently released Republican tax reform proposal (H.R. 1 – Tax Cuts and Jobs Act) has a provision that would effectively be a death knell for many common types of nonqualified deferred compensation plans.

Under the Bill, nonqualified deferred compensation will be subject to income tax when there is “no substantial risk of forfeiture”.  In plain English, this means nonqualified deferred compensation will be taxed when, or as, it becomes “vested”, instead of when it is paid.  (See Section 3801 of the Bill, which would enact new Internal Revenue Code Section 409B.)