Section 409A of the Internal Revenue Code (the "Code"), imposes significant restrictions on the timing of deferrals into and distributions from nonqualified deferred compensation plans paid by a company to an executive. Failure to follow these requirements will trigger current taxation of deferred amounts, a 20 percent excise tax as well as penalties and interest. The primary requirement for deferrals into nonqualified deferred compensation plans is that there must be a substantial risk of forfeiture and distributions can only be made in six circumstances. The regulations are extremely complex and require careful consideration to avoid triggering penalties. However, with tax reform on the table, some policymakers have targeted further restrictions on nonqualified deferred compensation or prohibiting it altogether. The Center believes that nonqualified deferred compensation can incentivize strong operating performance because executives forfeit the money in the event of bankruptcy and insolvency, making it a true form of pay at risk. In addition, nonqualified deferred compensation allows companies to restore benefits to employees, who are affected by qualified plan limits under the code in a non-tax-advantaged. The Center also questions whether restricting or eliminating nonqualified deferred compensation will generate significant revenue, given that where deferrals are not used, companies will be able to deduct compensation in the year paid.