125
‘‘(C) the amounts referred to in subpara-
graph (B) are available to satisfy the claims of 
the employer’s general creditors at all times 
(not merely after bankruptcy or insolvency). 
Such term shall not include a qualified employer 
plan. 
‘‘(2) SPECIAL RULES.—
‘‘(A) EMPLOYEE’S RIGHTS.—A plan shall 
be treated as failing to meet the requirements 
of paragraph (1)(A) unless—
‘‘(i) the compensation deferred under 
the plan is payable only upon separation 
from service, death, or at a specified time 
(or pursuant to a fixed schedule), and 
‘‘(ii) the plan does not permit the ac-
celeration of the time such deferred com-
pensation is payable by reason of any 
event. 
If the employer and employee agree to a modi-
fication of the plan that accelerates the time for 
payment of any deferred compensation, then all 
compensation previously deferred under the 
plan shall be includible in gross income for the 
taxable year during which such modification 
takes effect and the taxpayer shall pay interest
126
at the underpayment rate on the underpay-
ments that would have occurred had the de-
ferred compensation been includible in gross in-
come on the earliest date that there is no sub-
stantial risk of forfeiture of the rights to such 
compensation. 
‘‘(B) CREDITOR’S RIGHTS.—A plan shall 
be treated as failing to meet the requirements 
of paragraph (1)(B) with respect to amounts 
set aside in a trust unless—
‘‘(i) the employee has no beneficial in-
terest in the trust, 
‘‘(ii) assets in the trust are available 
to satisfy claims of general creditors at all 
times (not merely after bankruptcy or in-
solvency), and 
‘‘(iii) there is no factor that would 
make it more difficult for general creditors 
to reach the assets in the trust than it 
would be if the trust assets were held di-
rectly by the employer in the United 
States. 
Except as provided in regulations prescribed by 
the Secretary, such a factor shall include the lo-
cation of the trust outside the United States.
127
‘‘(c) DISQUALIFIED INDIVIDUAL.—For purposes of 
this section, the term ‘disqualified individual’ means, with 
respect to a corporation, any individual—
‘‘(1) who is subject to the requirements of sec-
tion 16(a) of the Securities Exchange Act of 1934 
with respect to such corporation, or 
‘‘(2) who would be subject to such requirements 
if such corporation were an issuer of equity securi-
ties referred to in such section. 
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—
For purposes of this section—
‘‘(1) QUALIFIED EMPLOYER PLAN.—The term 
‘qualified employer plan’ means—
‘‘(A) any plan, contract, pension, account, 
or trust described in subparagraph (A) or (B) 
of section 219(g)(5), and 
‘‘(B) any other plan of an organization ex-
empt from tax under subtitle A. 
‘‘(2) PLAN INCLUDES ARRANGEMENTS, ETC.—
The term ‘plan’ includes any agreement or arrange-
ment. 
‘‘(3) SUBSTANTIAL RISK OF FORFEITURE.—The 
rights of a person to compensation are subject to a 
substantial risk of forfeiture if such person’s rights 
to such compensation are conditioned upon the fu-
128
ture performance of substantial services by any indi-
vidual. 
‘‘(4) TREATMENT
OF
EARNINGS.—Except for 
purposes of subsection (a)(1) and the last sentence 
of (b)(2)(A), references to deferred compensation 
shall be treated as including references to income at-
tributable to such compensation or such income.’’
(b) CLERICAL AMENDMENT.—The table of sections 
for such subpart A is amended by adding at the end the 
following new item:
‘‘Sec. 409A. Inclusion in gross income of funded deferred com-
pensation of corporate insiders.’’
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts deferred after July 10, 
2002.
Æ