Trusts and Estates > Retirement > Section 409A Alert

Sep 1, 2007 12:00 PM

Section 409A Alert

By Thomas C. Foster, director, McCandlish Holton, PC, Richmond, Va.

Estate planners need to identify Internal Revenue Code Section 409A issues when advising executives and professionals who participate in “nonqualified deferred compensation plans.” The final regulations' effective date — Jan. 1, 2008 — is fast approaching and the impact could be severe on your clients if the plans in which they participate don't comply.

The American Jobs Creation Act of 2004 added Section 409A to the IRC.1 Since its enactment, this section has been a topic of much detailed and arcane discussion among employee benefits lawyers who design nonqualified deferred compensation arrangements on behalf of service recipient organizations. A lot of work has gone into revising and restructuring employers' plans to comply. The Internal Revenue Service also has put great effort into developing comprehensive regulations; the final regs, nearly 400 pages worth, were issued April 17, 20072 to be effective Jan. 1, 2008.3 Estate planners do not need to become experts. But they do need a working knowledge so they can identify potential problems.

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