IRS Issues Additional Transition Relief Under Section 409A

On October 4, the IRS issued Notice 2006-79 , which generally extends the deadline for amending plans to comply with Code Section 409A until December 31, 2007. The Notice also extends throughout 2007 most transition relief due to expire at the end of this year. While the Notice indicates that the IRS still intends to issue final regulations under Section 409A this year, it provides that the regulations will not become effective until January 1, 2008.

The extended transition relief does not apply to certain discounted stock rights granted by public companies to insiders. Nor does the extended transition relief change the general effective date for good faith compliance with Section 409A from January 1, 2005.  In other words, deferred compenstion plans must be operated in compliance with Section 409A requirements even if the plan document has not yet been amended.

To discuss this Notice with your contact in the Employee Benefits Group at Ice Miller, please use this link to access our directory of attorneys. If you do not have a contact in the Ice Miller Employee Benefits Group, please contact Jim Kemper, Marc Sciscoe, or Craig Burke.