A Legal Alert that we sent out on September 11, 2007 contained a high level summary of Notice 2007-78 (the "Notice"), which provides limited additional relief and guidance with respect to nonqualified deferred compensation plans under section 409A of the Internal Revenue Code. We have now prepared a full analysis of the Notice and its implications.
As described in further detail in the Legal Alert, the Notice:
Extends through December 31, 2008 the deadline to adopt amendments documenting compliance with the requirements of section 409A, except that employers must, by December 31, 2007, have in place written designations of a time and form of payment for amounts deferred as of the end of this year;
Provides additional guidance and relief in three areas that have raised questions and concerns: changes to "good reason" termination provisions in employment agreements; the renegotiation of severance provisions in an employment agreement upon the expiration of a prior agreement; and the application of the cash out rules in the final regulations;
Announces that the IRS and Treasury anticipate establishing a limited voluntary correction program for operational errors under section 409A in the near future; and
States that the transition period regarding rules for certain funded arrangements under section 409A(b) will not be extended.
Please visit our Web site on section 409A for links to the previous IRS guidance, past legal alerts, and other useful information on section 409A.