In late December 2004 the Internal Revenue Service issued preliminary guidance under the newly-enacted “nonqualified deferred compensation” rules of IRC § 409A. The guidance (Notice 2005-1) establishes important transition-rule opportunities for taxpayers attempting to adapt their deferral arrangements to the new statutory requirements, including an opportunity – expiring on March 15 of this year – to make additional deferrals under plans existing at December 31, 2004. Until the details become clearer, the IRS will require parties to act in accordance with a reasonable good-faith interpretation of the rules.
The teleconference is aimed particularly at for-profit enterprises and the particular issues that they face. Key questions remain and additional guidance is expected, but companies and their employees, consultants and other service providers need to consider now what steps they should take – and not take – in 2005 to comply with the new law.
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