Bruce Shnider  offers remarks in the October 25, 2004 issue of  Business Week.

The tax bill Congress passed on Oct. 11 might be a giant Christmas stocking for U.S. corporations, but it tightens the compensation rules for executives who run them. Honchos with deferred-compensation plans will face new measures designed to halt the sort of abuses seen when Enron Corp. was collapsing and top brass pulled out deferred-compensation money before it went bankrupt.

Execs who elect in advance to take their plan distribution when they leave a company will have to wait an extra six months if they're a key employee (an officer or anyone earning over $130,000). Also, says tax attorney Bruce J. Shnider of the Minneapolis firm Dorsey & Whitney, provisions allowing execs to withdraw money anytime if they accept, say, a 10% penalty will be banned.

Gone, too, will be plans that automatically pay out if a company's credit rating slips below a certain level, Shnider says. Also, the bill outlaws foreign trusts that make it harder for creditors to get at the otherwise vulnerable deferred comp. (An exec due such money is treated as an unsecured creditor in a bankruptcy.)

The new rule also sets how far in advance an exec must decide how much to defer, under what circumstances distributions can be taken, and how they will be paid, says compensation consultant Paula Todd of Towers Perrin. Those who do not comply will be subject not just to interest but also to a 20% penalty, adds Shnider.

Still unclear is the impact on some types of equity compensation such as discounted stock options, stock appreciation rights, and restricted stock units.