Section 409A Respite: IRS Grants One-Year Delay

Reversing decisions announced just six weeks ago, the Internal Revenue Service issued earlier this week a one-year extension of time for full compliance with Section 409A of the Internal Revenue Code. The IRS also moved several key compliance dates from December 31, 2007, to December 31, 2008. Most important, the IRS postponed the necessity to make permanent decisions on the basic structure of many compensation arrangements. This is welcome news for companies and their advisors, who have been confronting many difficult issues raised by Section 409A.

The compliance extension was announced in IRS Notice 2007-86. The Notice also extends until December 31, 2008, most of the transition relief provisions that were set to expire on December 31, 2007, including the provision permitting a change in the time or form of payment. As is currently the case, however, operational compliance with Section 409A is still required. This is especially important for employment terminations, deferral