At the urging of the AICPA and other practitioner groups, the Internal Revenue Service announced the effective date for the section 409A final regulations on nonqualified deferred compensation plans will be delayed until Jan. 1, 2009 – one year later than planned. Even before these regulations were finalized, the difficulty for employers to comply with the regulations by Jan. 1, 2008, was apparent, despite the Treasury Department’s efforts to issue an extension for some administrative requirements in Notice 2007-78 (www.irs.gov/pub/irs-drop/n-07-78.pdf).

The new deadline applies to amending the plan to bring it into compliance with Sec. 409A and obtaining employees’ elections as to the time and form of plan payments. In addition, employers have until the extended deadline to make decisions and take appropriate actions related to discounted stock options and stock appreciation rights

The new deadline also applies to the ability to link a payment election under a nonqualified plan to an election under a qualified retirement plan, 403(b) annuity or 457(b) plan (see www.irs.gov/pub/irs-drop/n-07-86.pdf).

In addition to the extension of transition relief, the IRS has issued Notice 2007-89 (www.irs.gov/pub/irs-drop/n-07-89.pdf) to address reporting and withholding requirements related to section 409A for 2007. The requirements for 2007 are generally the same as for 2005 and 2006.