XTitan

Today, the Treasury and the Internal Revenue Service released Notice 2008-41, authorizing the creation of a support group dedicated to helping companies avoid imposition of penalties from the inadvertent violation of Internal Revenue Code Section 409A. Dubbed 409AA, it guides companies and their advisors through a 12-step program designed to uncover areas of potential trouble. The Notice also specifies that commitments to participate must be received in writing in the year prior to commencement of the program, that shortening the number of steps is absolutely prohibited and that changes to the program will require participants to start 5 years later than originally scheduled.

Question came up regarding the order of deductions from NQDCP and 401(k). Since 401(k) must use 415( c)(3) as the definition of comp, shouldn't the 401(k) deferral percentage now always be applied after NQDCP deferrals are deducted? Example - gross salary $150,000, 10% 401(k) deferral, 10% NQDCP deferral Deferrals - $15,000 to NQDCP and $13,500 to 401(k)

Depends - when were the deferrals earned and vested? Deferrals to vest on 10/31/07. Based on the posted facts, no grandfathering.

Depends - when were the deferrals earned and vested?

BTW - Since you mentioned that the company may be deducting the premium, you may want to check Section 264 since this is would be unusual.

I recall there were typos in the proxy regs, but nothing material. They are scheduled to be published in the April 17th FR, but I never question delayed publications when it comes to 409A.

397 Pages of good clean reading, plus an additional 8 on split-dollar. Happy reading! Final Regs http://www.ustreas.gov/press/releases/reports/td9321.pdf Split-Dollar http://www.irs.gov/pub/irs-drop/n-07-34.pdf

Be fair - that's the date of publication. We still have until 12/31/2007.

I've been reading 105(h)(5) and 1.105-11, and I just can't find any clear answers about who is "among the highest paid 25 percent of all employees" ? Is it nothing more than looking at the number of employees as of the end of the plan year, ranking them by 415 comp, and calling the top 25% highly compensated individuals? Or, do you need to include the comp of any employee who received a reimbursement but may have left before the end of the plan year? Is it possible to make a determination who is top 25% in the middle of the plan year? XTitan

Way too many questions on this topic in my office: The proposed regs say if you have a 409A compliant plan that provides for a mandatory lump sum of a specified amount, then paying that amount out is fine. If the plan doesn't have a specified amount stated, the plan can be amended to provide a $10,000 threshhold that terminates the interest in all like plans. Makes we wonder - couldn't you just amend the plan, at least this year, to put in any specified amount? Why the $10,000 limit? Or, was this supposed to mean that you could amend a pre-409A plan to put in a de minimis amount without making the plan 409A compliant (which the language doesn't support)?

I read 409A as saying the delay is 6 months beyond the later of separation of service or death. I think the proposed regs reinforce the point by including death in the definition of separation of service. I think of this as the "suicide clause" - if you're fired for being indicted, you have to wait 6 months, but commit suicide and you get paid right away. However, I've had one attorney tell me I'm wrong. Hope that helps.