Section 409A Document Correction Opportunity

Since 2005, nonqualified deferred compensation plans have been subject to requirements under Section 409A as to operational as well as documentation issues. During the period 2005-2009, plan sponsors were given a grace period for bringing their plan documents into compliance with the Section 409A documentation requirements. However, because the application of the new rules was complicated, extensive and in many cases uncertain, the IRS has now issued guidance regarding voluntary corrections of documentation failures (IRS Notice 2010-6), which may provide additional opportunities to avoid the penalties applicable to a violation.

The key elements for the availability of most voluntary correction opportunities under the Notice are as follows: