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Under the recently published draft of the Tax Reform Act of 2014 (“TRA 2014”), taxable employers would learn first hand what their tax-exempt siblings have to deal with when paying their executives. Tax-exempt employers have long operated under §457(f) of the tax code, which taxes deferred compensation as soon there is no substantial risk of forfeiture. In 2005, §409A brought some of these regulations to taxable employers, along with some stiff penalties for non-compliance.

But TRA 2014 includes a new §409B that would lump taxable and tax-exempt employers together under rules similar to §457(f). Any non-qualified deferred compensation would be taxable as soon as it is not subject to a substantial risk of forfeiture. Section 409A — and its penalties — would be repealed, and §457(f) would be negated.

While TRA 2014 is only a draft with an uncertain future, it gives us an idea of what tax reform might look like, and how the deferred compensation landscape might change.