Required Changes to Deferred Compensation Plans

July 2008

IRS regulations regarding Section 409A of the Internal Revenue Code will become effective on January 1, 2009. By that date, all plans providing for compensation governed by 409A's new statutory and regulatory restrictions will need to be made compliant, both in form and in operation, with Section 409A's strict rules. Failure to comply with 409A's rules, either in form or in operation, can result in taxable income to employees or other service providers before the compensation is otherwise payable to them, as well as the imposition of a particularly onerous additional 20% income tax penalty and possible interest charges.

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