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January 7, 2010

IRS Provides Relief for NQDC Plan Document Failures

Code Section 409A governs taxation of nonqualified deferred compensation.  It provides specific rules relating to funding and distribution (also see409A Documentation Limited Relief from the Oct 2007 Benefit Beat).  The IRS just issued Notice 2010-6, providing a voluntary document correction program for failures occurring in these plans. 

For the voluntary correction program to be available, the failure must not be intentional.  This guidance provides many examples of correction methods for a variety of mistakes. 

This Notice, coupled with the guidance issued in 2008 (Notice 2008-113), provides nonqualified deferred compensation plans great opportunities to self-correct, and avoid the more onerous penalties that would apply if the plans are not corrected.

 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service

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