Do bonuses fall under the definition of deferred compensation?
Nassau: They may, depending on the circumstances. Bonuses payable only following the exercise of genuine employer discretion in the year of payment will not be deferred compensation, because they are paid in the year the legal right to the payment arises. If payable after the year the right arises, however, bonuses generally constitute deferred compensation unless excluded by the short-term deferral rule. The latter will exclude bonuses conditioned on the employee’s remaining employed on the payment date, assuming that requirement will be enforced in practice. It is important for bonus plans to be carefully drafted and at a minimum specify an appropriate payment date or range of dates, in order to avoid any possible Section 409A violation (as could arise if the payment were delayed so as not to be a short-term deferral and the plan lacked the specified payment date required by Section 409A). Accordingly, bonus plans that vest in the year before payment should specify a payment date in
