7 Steps for complying with deferred compensation plan rules

New rules for nonqualified deferred compensation plans under Internal Revenue Code Sec. 409A went into effect on Jan. 1, 2005. Recently, the IRS issued final regulations to provide guidance on the rules. Grant Thornton LLP has developed a Quick Reference Guide to Complying with the Sec. 409A Deferred Compensation Plan Rules that provides seven suggested steps to help companies comply with the rules.

Step 1: Identify arrangements that provide for a deferral of compensation

Step 2: For each arrangement, decide between removing the deferral of compensation and complying with the rules

Step 3: Design each arrangement to comply with the rules

Step 4: Develop and implement policies and administrative procedures

Step 5: Prepare written plan by Dec. 31, 2007

Step 6: Obtain service provider elections as to time and form of payment by Dec. 31, 2007

Step 7: Evaluate compliance for the period between Jan. 1, 2005 and Jan. 1, 2008

"It's very important that companies take these steps to comply," said Edgar Adkins, a tax partner and the compensation and benefits technical practice leader in Grant Thornton's National Tax Office in Washington, DC. "If they don't do so, employees face immediate taxation, plus a 20 percent penalty and interest. Unfortunately, non-compliance is a very real possibility, because the rules are complex, and because many companies do not realize that the rules apply to a very broad range of compensation and benefits arrangements."

The Quick Reference Guide to Complying with the Sec. 409A Deferred Compensation Plan Rules offers additional details on each of the seven steps. To download the full guide, go to www.GrantThornton.com/cbcquickrefguides.

You may like these other stories...

Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...
IRS chief: New rule on the way for tax-exempt groupsIRS Commissioner John Koskinen told the USA Today on Monday that the agency will likely rewrite a proposed rule regulating the political activities of nonprofit groups to...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.