Columbus partner Georgeann Peters was quoted in the May 2008 edition of the Journal of Accountancy in an article titled, "Now's the Time to Comply With NQDC Regs."
According to the article, in April 2007, the IRS issued final regulations under section 409A pertaining to nonqualified deferred compensation (NQDC) plans. The regulations represent a culmination of efforts to bring uniformity to a field that Congress perceived was too prone to abuse of income timing, especially by executives and other highly compensated individuals.
The IRS has granted transition relief for most provisions until the end of this year, the article states. Considerations to be weighed now include making new payment elections, whether elections linked with those of a qualified employer plan should be separated from it and whether to take advantage of grandfathering provisions for amounts that qualify to be exempt from section 409A.
Said Peters, "In my experience with clients, a lot of these plans are linked or tied to a tax-qualified arrangement such as a traditional pension plan or a 401(k) plan, and they haven't begun to figure out how they are going to de-link those things fully, and what their payment options are going to be, let alone to communicate that effectively to employees."
Many employers probably haven't faced necessary decisions about the new structure, Peters said. "This takes more vetting and discussion than a lot of the 409A compliance decisions that have to be made," she adds. Clients also have to decide whether to preserve grandfather treatment for amounts deferred before 2005." You have to evaluate how much money is at risk, because it is administratively more complicated to manage different buckets of money under different rules," said Peters. "I think a lot of clients—surprisingly many—are deciding not to grandfather that money, just because of the administrative complexities involved."
To read the full article online from the Journal of Accountancy website, click here.