409A Alert

Title:
409A Alert
Publication:
Tax and Trusts & Estates UPDATE
Practice:

December 31, 2008: That's the deadline for ensuring documentary and operational compliance with Section 409A of the Internal Revenue Code, absent another extension by the IRS of the transition period (which appears highly unlikely). As a practical matter, this means that employers with non-qualified deferred compensation arrangements in place for their employees (including supplemental executive retirement plans, severance/separation agreements, bonus plans and many other agreements providing for deferred compensation) must ensure that such arrangements are in writing and are operationally compliant with the complex and detailed rules imposed by the statute and regulations under Section 409A. Failure to do so puts participating employees at risk for a 20% excise tax liability, as well as interest and penalties on the non-compliant deferred compensation. EMPLOYERS ARE STRONGLY ADVISED TO ACT IMMEDIATELY IN HAVING QUALIFIED TAX COUNSEL REVIEW ANY DEFERRED COMPENSATION ARRANGEMENTS CURRENTLY IN PLACE, IN ORDER TO AVOID MISSING THE DEADLINE.