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ARTICLE · 23 APRIL 2007

IRS Issues Long-Awaited Final Section 409A Regulations

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On April 10, 2007, the IRS and the Treasury Department issued the final regulations interpreting the basic provisions of Section 409A of the Internal Revenue Code. The final rules are complicated and voluminous.

United StatesEmployment and HR
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Dennis Drapkin
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On April 10, 2007, the IRS and the Treasury Department issued the final regulations interpreting the basic provisions of Section 409A of the Internal Revenue Code. The final rules are complicated and voluminous.

The most significant aspect of the final rules is that they maintain the December 31, 2007, deadline for documentary compliance. Failure to properly amend deferred compensation plans and agreements prior to January 1, 2008, will subject employees to the potentially massive Section 409A penalties, including a 20 percent penalty tax and early inclusion in income upon vesting.

Most companies will need to start soon in order to meet the December 31, 2007, deadline.

Below are some of the key provisions of the final rules.

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