Failure to designate time and form of payment

[Guest intoERISA]

In an employment agreement, an employer granted an employee a 75k deferred comp right payable at termination at the employee's election under terms of a NQDC plan that would be created.

So, now I'm drafting the Plan and see a big problem -- the initial deferral election (the employment agreement) did not sufficiently limit time of distribution options. A deferral occured under the employment agreement but the plan is in violation of 409A because a time of distribution election was not made in time.

I don't think any transition rule allows a late deferral election. I was hoping the correction program might help, but I don't see any help there either.

Would love to hear any thoughts.

[Steelerfan]

I would think you'd be ok if, prior to 2008, you revise the employment agreement to comply with 409A. I don't see where there is any operational violation, unless you're allowing him to defer an amount in violation of 409A, such as an amount of salary that would otherwise be paid in 2007. Depending on the circumstances, you need to figure out which initial deferral election rules apply i.e. salary deferral, new participant salary deferral or nonelective, plus decide how the amount will be paid. E.g. if this is a nonelective amount, then you can defer and set the time and form of payment at the time the LBR ocurrs, which would normally be when the agreement is executed.