The Internal Revenue Service (IRS) has announced that the transition relief for compliance with the final regulations under section 409A of the Internal Revenue Code (409A) has been extended generally for one year.
Section 409A was effective on January 1, 2005 and all affected nonqualified deferred compensation plans have been required to comply with the statute since that date. Under prior guidance, these plans were required to comply in operation with the final regulations beginning in 2008. Notice 2007-86, issued October 22, generally extends the transitional period for compliance with the final regulations to December 31, 2008 . The notice also confirms that the Treasury Department and the IRS expect to issue guidance regarding a correction program as soon as possible.
The regulations provide guidance regarding the requirements for deferral elections and payment timing under section 409A. The regulations were in response to legislation enacted by Congress in 2004 to address concerns involving reported abuses of nonqualified deferred compensation plans.