Code Section 409A

• Overview
• Agenda
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The IRS is giving employers one last chance to fix their plan documents and compensation agreements for Code Section 409A. However, the IRS has also announced some new interpretations of Section 409A provisions that will require most employers to make changes to their plans and agreements. Employers that make these changes before January 1, 2011, can avoid IRS penalties, in most cases. In 2010, the IRS issued Notice 2010-6, Relief and Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to Comply with Code Sec. 409A(a). Importantly, the notice does much more than just offer correction methods. The notice contains numerous examples of situations that the Code Sec. 409A final regulations do not clearly address - and provides for significant penalties for many plan provisions that most executive compensation professionals would view as a foot fault. The good news is that the notice provides methods for taxpayers to correct many types of failures to comply with the document requirements applicable under Code Sec. 409A to nonqualified deferred compensation plans. Employers that take advantage of the notice provisions would be able to avoid or reduce the current income inclusion and additional penalty taxes under Code Sec. 409A. As with the IRS' successful correction programs for qualified retirement plans, the IRS intends this document correction program to encourage employers to review nonqualified deferred compensation plans to identify provisions that fail to comply with the requirements of Code Sec. 409A and regulations thereunder, and correct those plan provisions promptly.

Faculty

Michael Melbinger, Winston & Strawn LLP

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