Bill May Cap Non-Qual Deferred Comp Accrual At $1 Million

- Change Internal Revenue Code Section 409A to impose a dollar cap on the annual accrual of "nonqualified deferred compensation that is the lesser of $1 million or the individual's average annual compensation determined over 5 years."

Failure to satisfy the cap would trigger ordinary income tax plus a 20% additional tax.

- Change the Section 162(m) ("million dollar deduction" limit) to treat any former employees (and beneficiaries) as continuing to be covered by the Section 162(m) limit in the future. The change would apply the Section 162(m) limit to executives who left their current employers.

The proposed change in federal tax policy would affect top executives at hundreds of corporations and would raise taxes on some of the nation's wealthiest workers by about $806 million over 10 years, according to the Congressional Joint Tax Committee.

The proposed non-qualified deferred comp change is included in a package of tax shelter and tax loophole changes that could raise federal tax revenue by about $8.3 billion over a decade, according to the Joint Tax Committee.