On October 22, 2007, the IRS issued Notice 2007-86, which provides a general extension of the transition relief that was scheduled to expire on December 31, 2007. The transition relief has been extended to December 31, 2008, to provide more adequate time to review existing arrangements and make informed and well-reasoned decisions regarding the necessary changes to bring them into compliance with the final regulations.
Generally, during 2008, taxpayers are required to operate deferred compensation plans in compliance with the plan’s terms to the extent that those terms are consistent with Internal Revenue Code Section 409A and the applicable guidance. While taxpayers are not required to fully follow the final regulations prior to January 1, 2009, reliance upon those regulations will be treated as reasonable, good faith compliance.
This means that employers have an extra year (until December 31, 2008) to comply with the Code Section 409A documentation requirements. They also have an extra year of transition relief, and in particular, an extra year to modified plan payment provisions (subject to the current restrictions on those modifications).
All deferred compensation arrangements must be reviewed and amended to ensure compliance with Code Section 409A by December 31, 2008. If you would like assistance with Code Section 409A compliance, please contact a member of the Gray Plant Mooty Employee Benefits and Executive Compensation group.
This article is provided for general informational purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances. You are urged to consult a lawyer concerning any specific legal questions you may have.
Gray Plant Mooty is recognized as one of the leading corporate law firms in Minnesota and one of the top franchise firms in the world. Our roots go back to 1866. Today, we are a 180-plus attorney, full-service firm with offices in Minneapolis and St. Cloud, Minnesota; Washington, D.C.; and Fargo, North Dakota.