Deadline for Written Compliance with 409A Delayed Again

The deadline for deferred compensation plan documents to comply with Section 409A of the Internal Revenue Code has been pushed back again, this time until December 31, 2008. Originally, plans were required to comply by January 1, 2007. IRS Notice 2007-78 provides only limited transition relief; for 2007, companies still must comply in substance with the law and final regulations that were issued in April. The notice does not extend the deadline for compliance in the operation of plans beyond the previously announced date of January 1, 2008.

What the notice does provide is an extension of the time companies have to create appropriate plan documents under which deferred compensation arrangements will operate. Section 409A requires that deferred compensation be granted only under written plans, which has not been common practice in the past. The documents must comply with all written regulations and accurately reflect the operation of the plan from January 1, 2008, through the date of the amendment of the plan to conform with the new rules. The notice lays out a specific procedure for how to designate the time and form of deferred compensation so that it complies with the regulations, and gives companies until the end of the year to adopt appropriate language. It does not change the substance of the requirement concerning what kinds of deferrals and payments are allowed.