IRS Issues Final Rules on Nonqualified Deferred Compensation
The Service issued final regulations under Sec. 409A that apply starting in 2008 and may be applied retroactively. All deferred-compensation arrangements must be in writing and in compliance by Dec. 31, 2007.
from The Tax Adviser
The Service issued final regulations on nonqualified deferred-compensation arrangements under Sec. 409A (TD 9321, 4/10/07). These rules generally follow the proposed regulations (REG-158080-04, 10/4/05), but provide additional guidance and clarify many key issues, including:
The final regulations were effective April 17, 2007, but generally apply starting in 2008 and may be applied retroactively. All deferred-compensation arrangements must be in writing and in compliance with Sec. 409A by Dec. 31, 2007. Plans are not required to be amended retroactively to cover the period from the Jan. 1, 2005 effective date of Sec. 409A through the end of the transition period, but must show operational compliance with the rules during that time.
Additional separate guidance is expected to address the prohibition on offshore funding and springing trusts, application of the rules to partnership arrangements, and income calculation and inclusions, none of which is covered in the final regulations.
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