Nonqualified Deferred Compensation Plans

Pennsylvania follows many of the provisions established by the Internal Revenue Code with respect to when to include certain deferrals of compensation as income for PA PIT purposes.

For purposes of determining when deferred compensation of employees (other than employees of exempt organizations and State and local governments) is required to be included in income, the rules of sections 83, 409A and 451 of the Internal Revenue Code apply. Distributions from nonqualified deferred compensation plans attributable to elective deferrals and earnings thereon are taxable at the time of the distributions irrespective of retirement.

For additional information regarding nonqualified deferred compensation plans, refer to Personal Income Tax Bulletin 2005-03 [PDF] .