The Treasury Department and the IRS have proposed regulations on deferred compensation
under section 409A of the Internal Revenue Code.
Section 409A governs plans and arrangements that provide nonqualified deferred
compensation to employees, directors, or other service providers. These regulations
implement new provisions established by the American Jobs Creation Act (AJCA).
The proposed regulations identify which plans and arrangements are covered
under section 409A, outline operational requirements for deferral elections
and permissible timing for deferred compensation payments made under the rules.
The rules also extend the deadline for documentary compliance with the new
rules to December 31, 2006. The deadline was initially December 31, 2005.
The proposed regulations provide a framework for implementing the requirements
of section 409A, taking into account the numerous comments received from the
public on Notice 2005-1, issued last December, according to the IRS.
The effective date proposed for the regulations is January 1, 2007. Taxpayers
may rely on the proposed regulations until final regulations are effective,
according to the IRS.