In IRS Notice 2007-78, the Internal Revenue Service (IRS) provided employers a limited extension for amending their nonqualified deferred compensation plans to comply with Section 409A. The deadline was changed from December 31, 2007 to December 31, 2008.
However, there are some important limits on the relief. First, the extension is conditioned upon a written designation—which may be in a document other than the plan—of all of the key terms governing time and form of payment by December 31, 2007. Second, the Notice does not extend beyond December 31, 2007, the transition rules that were previously provided by the IRS, such as participants' ability to change the time and form of payment elections without complying with the subsequent election and anti-acceleration rules. Finally, year-end action may also be desirable to help exempt employment/severance agreements from Section 409A.
A more detailed analysis of Notice 2007-78 will be available shortly to help evaluate what year-end 409A actions should be taken. In the meantime, if you have any questions regarding IRS Notice 2007-78, please call your regular McDermott Will & Emery lawyer or any of the listed contacts.