IRS Provides New 409A Documentary Correction Program

On January 5, the IRS issued Notice 2010-6, which establishes a document correction program for nonqualified deferred compensation programs under Internal Revenue Code Section 409A. Previously, the IRS had permitted correction only of operational failures without penalty, not of documentary errors. The notice fills a significant hole left by prior guidance. Affected taxpayers now have the opportunity to voluntarily correct both operational failures under Section 409A and failures to comply with the document requirements under Section 409A. Eligibility rules for correction under the notice are detailed, and in some cases complex. Except as provided under the transition rules, the notice does not generally provide relief for document failures due to plans linked to qualified plans or other nonqualified deferred compensation plans. In addition, the relief does not apply to stock rights.