United States: 409A Written Amendment Deadline Likely To Be Delayed

As you know, we have been awaiting final regulations under Internal Revenue Code Section 409A. 409A governs "non-qualified deferred compensation." The IRS had previously set a Dec. 31, 2006, deadline to amend documents to comply with 409A.

Dan Hogans stated at a recent presentation on 409A that the regulations will be issued this fall. Mr. Hogans is a Treasury Department official assigned to the 409A regulation project. He remarked that the original deadline for amendments of Dec. 31, 2006, will likely be delayed. He said that the final regulations will reflect many changes due to comments made on the proposed regulations.

The likelihood of an extension does not change the fact that good faith compliance with 409A has been required since Jan. 1, 2005. Therefore, it is important to identify all arrangements and circumstances that might involve 409A issues.

We have been doing 409A compliance reviews for clients and have found that employment agreements, termination agreements, change in control agreements, severance policies or plans and annual cash bonus plans are commonly overlooked in connection with 409A. None of those should be adopted, amended or operated without a 409A compliance review.

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