The Department of Treasury and the Internal Revenue Service have extended the deadline by which plan documents are to be in documentary compliance with section 409A and provided other guidance in Notice 2007-78. Although the documentary deadline extension is welcome, employers must still act before the end of 2007 if they wish to take advantage of the transition relief available this year and to have a compliant time and form of payment specified in writing.

The Notice provides the following:

  • Documentary Deadline – The Notice provides that a plan document needs to be in compliance with section 409A by December 31, 2008 (rather than by December 31, 2007).To the extent the plan is amended in 2008, the amendment must be retroactive to January 1, 2008, and the amendment must accurately reflect the operation of the plan through January 1, 2008.
  • Compliant Time and Form of Payment – The Notice requires plans to designate in writing before January 1, 2008 a compliant time and form of payment for deferred compensation under the plan subject to section 409A.
  • Good Faith Compliance and Effective Date of Final Regulations – The Notice does not delay the effective date of the final regulations.Therefore, as of January 1, 2008, employers will need to be in compliance with the final regulations rather than Notice 2005-1, which has been the basis for good faith compliance for the past three years.
  • Limited Voluntary Compliance Program – The Notice states that the Department of Treasury and Internal Revenue Service intend to issue a limited compliance program to allow employers to correct certain unintentional operational failures with respect to section 409A.

The Notice provides additional guidance – this is not an exclusive list.

Employers should not mistake the extension of the documentary compliance deadline with an extension of good faith compliance similar to the extensions that occurred at the end of 2005 and 2006. Employers need to confirm that their plans have, in writing, a compliant time and form of payment. In addition, employers should review the transition relief available only this year and determine whether they intend to take advantage of this relief.

The Notice is available at the IRS web site ( Please contact the attorney with whom you work regarding section 409A.