26 September 2008

Section 409 Deferred Compensation Update

The American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code effective January 1, 2005 to govern taxation of deferred compensation (other than qualified plan compensation). These rules cover forms of compensation not classified as deferred compensation under prior law and subject service providers and employers to new significant tax costs and reporting obligations.  While Treasury Regulations under Section 409A have been adopted in stages, the effective date for the written documentation requirement for many provisions has been postponed. This period of forbearance is soon to end. By December 31, 2008, all non-qualified deferred compensation arrangements must be in current operational compliance with the new rules of Section 409A and all deferred compensation documents must comply with the final 409A regulations. Please open the attached Alert to learn more about compliance with Section 409A.

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