Nonqualified Deferred Compensation Selected Compliance Requirements of Code § 409a

This is the third article in a series of articles discussing Internal Revenue Code Section 409A and the related guidance issued to date. The first article provided an overview the origin and general requirements Code § 409A imposes on "nonqualified deferred compensation plans." The second article explored the limited deferred compensation arrangements that are (or may be) wholly or partly excluded from the sweeping requirements of Code § 409A. This final article focuses on selected compliance items. Deferred compensation arrangements that are not excluded from coverage under Code § 409A must be (or have been) operationally compliant as of January 1, 2005. Final regulations issued April 17, 2007 require all nonqualified deferred compensation plans to be in writing and for plan documents to be brought into compliance with the law and regulations by December 31, 2007.

Update

Since this article was published in the Bulletin, the IRS issued Notice 2007-78. Under the Notice, the plan still must specify - by December 31, 2007 - a compliant time and form of payment for compensation deferred as of January 1, 2008. The plan also must be operated in compliance with Code Sec. 409A. The Notice merely provides an extension to December 31, 2008 for plans to eliminate noncompliant provisions and fully comply with the final regulations retroactively to January 1, 2008.

Copyright © 2007 LexisNexis Matthew Bender. This article was written by Kurt Smidansky and Monique Warren, attorneys in the Jackson Lewis Employee Benefits Counseling, Benefits Litigation, and Privacy Practice Group, for Bender's Labor & Employment Bulletin (Aug 2007). Published simultaneously with the Bulletin, the article is reproduced here with the kind permission of LexisNexis Matthew Bender.