deferrals post- 2004

[Guest tom w]

NQDC plan was set up some time in 2002. Plan has 5 participants who all made deferrals until 6/30/05, then stopped. Plan has not yet been amended for 409A.

Is there a violation of 409A?

If so, I understand the penalty to be income taxes + 20% excise tax + interest, right?

Can this be avoided by amending the plan to be compliant with 409A prior to 2009?

Thanks!

[Oh so SIMPLE]

As to the compensation deferred under the plan prior to 2005, if there has been no material modification since Oct 3, 2004, then that should be grandfathered passed 409A.

As to the compensation deferred under the plan from 1/1-6/30/2005, it is subject to 409A and should have been handled in a way that was a good faith interpretation of the interim guidance. If so, then you do have through the end of 2008 to amend to bring the document into compliance as it affects these 2005 deferrals.

If those 2005 deferrals have not been handled in a good faith interpretive way, then you have a violation and the income taxes + 20% excise tax + interest.