NQDC Plan Sponsors Reminded of 409A Compliance Deadline

October 21, 2010 (PLANSPONSOR.com) – Employers with a non-qualified deferred compensation plan (NQDCP) that has not been amended to comply with Section 409A of the tax code have until year end to take advantage of a special offer to bring the plan into line.

According to a new client advisory from attorney Adam B. Cantor of the national law firm Fox Rothschild, a special Internal Revenue Service (IRS) compliance program allows NQDCPs in existence before January 1, 2009, to amend their plan by December 31, 2010, with the changes to take effect as of January 1, 2009, as long as sponsors satisfy certain IRS tax return reporting requirements and correct any operational failures due to this retroactive correction.

Cantor said that plans out of compliance that do not correct by the year-end deadline will find the plan participant being taxed as soon as the deferred amount vests and the IRS imposes a 20% excise tax and interest on the deferred amount starting from the time of initial deferral or vesting, whichever is later.

The Fox Rothschild advisory is at http://www.jdsupra.com/post/fileServer.aspx?fName=6f086cb6-4674-40cc-98f3-b3f388f68d24.pdf.