Final Deferred Compensation Regulations To Be Delayed Until Late Summer

Earlier this week, one of the Treasury officials involved in the regulation process indicated that final Section 409A regulations, originally targeted for issuance by the end of June, would be delayed until late summer. Earlier guidance under Section 409A has been subject to multiple delays, so it is possible that the late summer target will be missed as well. This official acknowledged that, even if the late summer target is met, the delay will pose significant difficulties for employers and other payers of deferred compensation. He indicated that Treasury officials are considering the possible extension of transition rules currently scheduled to expire at the end of 2006 to address these difficulties.

For a discussion of Section 409A and prior IRS guidance, please see these prior E-Updates:

Although substantial guidance under Section 409A has been issued, many basic issues, including how to calculate, report, and withhold taxes under Section 409A, have not been addressed. Pending further guidance, employers and other payers of deferred compensation are required to comply in good faith with the statutory requirements. Good faith compliance currently includes the retroactive amendment of all deferred compensation arrangements by December 31, 2006, to comply with Section 409A.

We will provide further information of the upcoming guidance as it becomes available. Meanwhile, should you have any questions on Section 409A or on the upcoming guidance, please call or e-mail your contact in the Employee Benefits Group at Ice Miller. If you do not have a contact at Ice Miller, please contact James D. Kemper, Marc W. Sciscoe, or Cynthia P. Purvis, or visit us at www.icemiller.com to view a complete listing of our attorneys.