US Treasury And IRS Issue Guidance On Deferred Compensation
The Treasury Department and IRS has issued a new notice providing guidance concerning
new tax legislation affecting deferred compensation plans brought in under the
American Jobs Creation Act.
This legislation added a new section to the tax code known as 409A, under which,
unless certain specified requirements are met, all amounts deferred under a
non-qualified deferred compensation plan for all taxable years are currently
includible in gross income. Under sections 885(e) and 885(f) of the legislation, Congress directed the
Secretary of the Treasury to issue guidance regarding the termination and amendment
of certain non-qualified deferred compensation arrangements and to define a change
in ownership or control for purposes of Section 409A, within 60 days and 90
days respectively of enactment of the legislation. Notice 2005-1 addresses these guidance items. In addition, the guidance defines
the arrangements that will be considered deferred compensation subject to the
new rules. Finally, the guidance outlines the new reporting and employment tax obligations
of employers in connection with section 409A. IRS Chief Counsel Donald Korb noted: "Given the significant changes that
section 409A will require for non-qualified deferred compensation plans, we developed
this guidance being mindful to avoid establishing rules that could become traps
for the unwary." Section 409A applies to amounts deferred on or after January 1, 2005, subject
to several special effective date rules. The full text of the US Treasury Guidance on Deferred Compensation can be found in the Tax News Resources section.
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