Section 409A of the Internal Revenue Code for the first time comprehensively codifies the federal income tax treatment of nonqualified deferred compensation. In general, Section 409A provides that non-complying deferrals can be subject to accelerated inclusion in income, an additional 20 percent tax and interest. Extensive and complex final regulations were issued in 2007.

Full compliance with Section 409A is scheduled to be required in less than four months, by January 1, 2009. This deadline is the result of the considered and responsive review by personnel from Treasury, the IRS and the legislative branch, as 2007 ran its course. At that time, an extension sought by the market from an impending December 31, 2007 deadline was, gratefully, granted, ostensibly on the basis that compliance by year-end 2007 would be difficult to achieve, would result in inordinate corporate distraction and would produce a less-than-optimal quality of compliance.

There are suggestions in the market that it may be time to review the present state of Section 409A transition relief. See the blog on this topic of earlier today - Oringer, "Reviewing the Scope of Section 409A Transition," BNA Pension and Benefits Blog, (September 24, 2008). In this regard, circumstances have changed, and the financial crisis has thrown a wide range of institutions into disarray. In addition, there continues to be considerable substantive interpretive uncertainty, arguably making complete and total compliance by December 31, 2008 difficult at best to attain, even under the best of market conditions.