<nobr>Sep 26, 2008</nobr>

IRS Issues Revenue Procedure on Determination Letters on Section 409A Arrangements

The Internal Revenue Service today issued Revenue Procedure 2008-61, which describes areas in which rulings and determination letters will not be issued as to the tax consequences of arrangements described in Section 409A of the Internal Revenue Code.

Revenue Procedure 2008-61 states that IRS will continue to not issue rulings concerning the income tax consequences of establishing, operating, or participating in a nonqualified deferred compensation plan described in Section 409A, but IRS generally will rule on the application of other tax law provisions, such as FICA and estate and gift taxes to taxpayers who participate in those plans.

Specifically, rulings will not be issued with respect to the following:

• The income tax (including income tax withholding) consequences of establishing, operating or participating in a nonqualified deferred compensation plan as defined in section 409A;


• Whether a plan is described in section 1.409A-1(a)(3)(iv) (plans subject to a totalization agreement and similar plans) or section 1.409A-1(a)(3)(v) (certain broad-based foreign retirement plans);


• Whether a plan is a bona fide vacation leave, sick leave or compensatory time plan described in section 1.409A-1(a)(5); and


• Whether a plan provides for the deferral of compensation under section 1.409A-1(b) (including whether an amount is a short-term deferral and whether certain stock rights, foreign plans and separation pay plans are subject to section 409A).

IRS Issues Correction Regarding Application of Section 409A to Non-Account Balance Plans

Meanwhile, the IRS on September 24 published in the Federal Register a notice of correction to the final regulations relating to Section 409A and nonqualified deferred compensation plans, which were published in April 2007.

The correction is to Section 1.409A6, paragraph (a)(3)(i), concerning the application of Section 409A and compensation deferred before January 1, 2005, under a nonqualified deferred compensation plan that is a nonaccount balance plan.

IRS said the correction is effective September 24, 2008, and applicable on April 17, 2007.

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Revenue Procedure 2008-61

IRS Notice of Correction

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