New Regulations on Deferred Compensation Issued

The Treasury Department and IRS have issued proposed regulations on deferred compensation under Section 409A, which governs nonqualified deferred compensation to employees, directors or other service providers. The proposed regulations identify which plans and arrangements are covered, outline operational requirements, and describe permissible timing for deferred compensation payments made under the rules. The rules also extend the deadline for documentary compliance to December 31, 2006. The deadline was initially December 31, 2005. The effective date proposed for the regulations is January 1, 2007. Taxpayers may rely on the proposed regulations until final regulations are effective. The regulations are over 200 pages long and as are described by experts as extremely complex. The Treasury Department press release on the regulations is here and includes a link to download the text of the regulations.