IRS Clarifies Non Qual Guidance

>The clarifications provide guidance regarding transition rules under section 409A for nonqualified deferred compensation plans. The original Notice 2005-1 was issued December 20 (See Feds Release NQDC Plan Guidance ).

>The clarifications are as follows:

• Paragraph (c) of Q&A 19 in the December 20 version of the notice provides transition relief under which certain amendments and elections will not be treated as a change in the form or timing of a payment under section 409A(a)(4). The revisions to the paragraph make it clear that those amendments and elections also will not be treated as an acceleration of the payment under section 409A(a)(3).
• The first sentence of Q&A 20 provides transition relief with respect to certain terminations of participation in a plan and certain cancellations of deferrals by participants. The revisions to that sentence make it clear that the relief in that sentence also applies to deferrals prior to 2005 that are subject to section 409A (and that otherwise meet the conditions for the transition relief).

>The revised notice 2005-1, with clarifications, is available  here . The notice will be included as scheduled in Internal Revenue Bulletin 2005-2, available January 10.