Page:United States Statutes at Large Volume 118.djvu/1665

 118 STAT. 1635 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(i) IN GENERAL.—If at any time during a taxable year a nonqualified deferred compensation plan— ‘‘(I) fails to meet the requirements of para graphs (2), (3), and (4), or ‘‘(II) is not operated in accordance with such requirements, all compensation deferred under the plan for the tax able year and all preceding taxable years shall be includible in gross income for the taxable year to the extent not subject to a substantial risk of forfeiture and not previously included in gross income. ‘‘(ii) APPLICATION ONLY TO AFFECTED PARTICI PANTS.—Clause (i) shall only apply with respect to all compensation deferred under the plan for partici pants with respect to whom the failure relates. ‘‘(B) INTEREST AND ADDITIONAL TAX PAYABLE WITH RESPECT TO PREVIOUSLY DEFERRED COMPENSATION.— ‘‘(i) IN GENERAL.—If compensation is required to be included in gross income under subparagraph (A) for a taxable year, the tax imposed by this chapter for the taxable year shall be increased by the sum of— ‘‘(I) the amount of interest determined under clause (ii), and ‘‘(II) an amount equal to 20 percent of the compensation which is required to be included in gross income. ‘‘(ii) INTEREST.—For purposes of clause (i), the interest determined under this clause for any taxable year is the amount of interest at the underpayment rate plus 1 percentage point on the underpayments that would have occurred had the deferred compensa tion been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation is not subject to a substantial risk of forfeiture. ‘‘(2) DISTRIBUTIONS.— ‘‘(A) IN GENERAL.—The requirements of this paragraph are met if the plan provides that compensation deferred under the plan may not be distributed earlier than— ‘‘(i) separation from service as determined by the Secretary (except as provided in subparagraph (B)(i)), ‘‘(ii) the date the participant becomes disabled (within the meaning of subparagraph (C)), ‘‘(iii) death, ‘‘(iv) a specified time (or pursuant to a fixed schedule) specified under the plan at the date of the deferral of such compensation, ‘‘(v) to the extent provided by the Secretary, a change in the ownership or effective control of the corporation, or in the ownership of a substantial por tion of the assets of the corporation, or ‘‘(vi) the occurrence of an unforeseeable emergency. ‘‘(B) SPECIAL RULES.— ‘‘(i) SPECIFIED EMPLOYEES.—In the case of any specified employee, the requirement of subparagraph (A)(i) is met only if distributions may not be made

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