The long wait for definitive guidance on the new deferred compensation tax rules is finally over!
Yesterday afternoon, the IRS issued almost 400 pages of final regulations under Code Section 409A. We are currently evaluating these final regulations to identify changes made to the proposed regulations and to assess their impact on a broad spectrum of compensation arrangements.
For now, what we can tell you is that the effective date of the final regulations is April 17, 2007, and the compliance deadline for documenting deferred compensation arrangements has not been extended. Consequently, any compensatory arrangement found to be a deferred compensation arrangement must be brought into written compliance with Code Section 409A no later than December 31, 2007. This means that every employment, separation or termination agreement, deferred compensation plan, equity incentive plan, or the like, which involves delayed payment, should be assessed soon to determine what, if any, changes will be needed to ensure compliance with the new regulations.
Once we have completed our review of these voluminous regulations, we will contact our clients to discuss their impact.