IRS Extends Section 409A Compliance Deadline

As described in our October 2004 and December 2004 Client Alerts, the American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code. Section 409A substantially changed the federal income tax treatment of nonqualified deferred compensation ("NQDC") arrangements maintained by employers and other entities that receive services from employees, partners, directors, and other individuals.

The IRS recently extended to December 31, 2007 both the deadline for adopting written plan amendments to bring NQDC arrangements into compliance with Section 409A and the period during which NQDC arrangements may be operated in good faith compliance with Section 409A. The IRS also extended until December 31, 2007 the period during which an NQDC arrangement may permit new elections to be made with respect to time and form of payment. However, certain restrictions apply to election changes that would affect amounts otherwise payable in 2006 or 2007 or that would accelerate