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IRS Clarifies Employer Responsibility Regarding
Annualization of Employee Salary
Final regulations recently issued under Section 409A of the Internal Revenue Code impact colleges, universities, private and public schools, and other employers that, either as a general policy or as elected by the employee, pay faculty, teacher or other employee salaries over a period longer than the period the employee actually works (e.g
. pay salary over twelve months for faculty who work nine months). The regulations state that this type of arrangement will be treated as deferral of compensation under Code Section 409A. This has resulted in a great deal of confusion among employers who are busy preparing for the upcoming academic year as to what is required to timely comply. On August 7, 2007, the IRS released guidance clarifying that the new regulations do not apply to elections to annualize salary (or to use a different pay structure) for academic years beginning before January 1, 2008, and thus are not applicable for this academic year.
Nonetheless, there are some requirements under Section 409A that impact annualization of salary that are already applicable of which you should be aware.
Read more about the IRS requirements for salary annualization. |
