Spring 2008The deadline for compliance with Section 409A of the Internal Revenue Code is quickly approaching. The final 409A regulations released on April 10, 2007, and subsequent IRS guidance require compliance with all 409A documentation requirements by December 31, 2008. Section 409A applies to certain employee plans, including non-qualified deferred compensation plans, severance plans, and certain equity-based compensation arrangements. Employers providing these plans to employees need to have their plans amended to comply with the final regulations by this deadline.
The application of 409A is broad. Employers providing any type of deferred compensation or equity-based compensation arrangements to their employees should have their plans reviewed by an attorney as soon as possible to determine the impact of the final regulations on their plans and to bring their plans into compliance by the deadline of December 31, 2008. Failure to comply with the final regulations by the deadline subjects employees to significant taxes, penalties, and other sanctions.
This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.