<nobr>Oct 22, 2007</nobr>

Treasury, IRS Extend Transition Relief for Deferred Compensation Plans

The Treasury Department and Internal Revenue Service (IRS) October 22 announced in Notice 2007-86 that the transition relief for compliance with the final regulations under Internal Revenue Code Section 409A has been extended generally for one year.

Section 409A was effective on January 1, 2005, and all affected nonqualified deferred compensation plans have been required to comply with the statute since that date. Under prior guidance, these plans were required to comply in operation with the final regulations beginning in 2008.

Notice 2007-86 generally extends the transitional period for compliance with the final regulations to December 31, 2008. The notice also confirms that the Treasury Department and IRS expect to issue guidance regarding a correction program as soon as possible.

According to the Notice, the transition relief revokes and supersedes the transition relief provided in Notice 2007-78 issued September 10, and modifies the relief provided in section IV of Notice 2007-78 related to employment agreements. The transition relief does not affect the guidance provided in Notice 2007-78 related to predetermined cashout features, or to the application of section 409A(b) (restrictions on certain trusts and other arrangements).

ERIC has lobbied long and extensively for additional relief under Section 409A. On several occasions, ERIC met with and wrote to senior IRS and Treasury officials, urging a one-year delay in the effective date of the final regulations.

Text Files:

Notice 2007-86

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