IRS Expands Relief for Section 409A Document Corrections

On Nov. 30, 2010, the IRS released Notice 2010-80, providing additional relief under which nonqualified deferred compensation plan documents which fail to comply with Section 409A of the Internal Revenue Code (Section 409A) may be amended to comply.

Nonqualified deferred compensation plans that are subject to Section 409A must comply with Section 409A in both form and operation. Under the statute and final 409A regulations, any failure to comply with Section 409A in form or in operation, regardless of materiality, generally subjects any employee or other service provider affected by the failure to immediate income inclusion (or income inclusion at the time of vesting, if later), a 20% additional income tax, and an additional interest tax on any compensation deferred under the plan or under any similar plan.