The guidance is in the form of proposed regulations that outline the operational requirements around elections to defer compensation and the timing around distributions of deferred compensation. Companies will have until December 31, 2006 to amend their plans for compliance. The first deadline for these amendments had previously been December 31, 2005. The proposed regulations will be effective January 1, 2007.
The proposed regulations provide that sponsors of 457(f) plans may not rely upon the definition about the deferral of compensation for the purposes of applying Section 457(f), but may rely upon the definitions for items such as vacation and sick leave.
They also make permanent the short-term deferral rule set forth in IRS Notice 2005-1. The proposals also allow for the continuation of stock appreciation rights (SARs) for both public and private companies so long as the SAR is granted at fair market value.
The proposed regulations set forth some acceptable valuation methods. They also provide, with some modification, for the exception from coverage under 409(a) of broad-based severance programs. Guidance is also provided around when split-dollar life insurance programs are covered under 409(a).
The Treasury document is here .
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