Effective Date as 01/01/05

[Guest Guy Incognito]

When amending NQDC arrangements for 409A, does the effective date of the amendment have to be (A) the later of 01/01/05 or the date of the NQDC arrangement, or can it just be (B) the actual date of the amendment?

[J Simmons]

My recollection, off the top, is that the amendment has to apply to all benefits accrued on or after 1/1/2005, but not as to those that accrued prior thereto--unless there has since 10/3/2004 been a material modification to the plan as it then existed.

[Steelerfan]

The effective date can be anywhere in between 1/1/05 and 1/1/08. I recall some guidance that said the amendment doesn't have to be retroactive to 1/1/05 as long as the plan was in operational compliance on and after 1/1/05.

[Everett Moreland]

The guidance referred to by Steelerfan is the following from 72 Federal Register at 19274, as modified by Notice 2007-86, section 3.02(A):

"B. Requirement To Amend Plans on or Before December 31, 2008

"Where there have been deferrals of compensation under a plan as of January 1, 2009 but the deferred compensation has not been paid, the plan must be made compliant with section 409A on or before December 31, 2008, with respect to such deferred compensation. These amendments are required only to bring the document into compliance effective January 1, 2009, and are not required to reflect any amendments made or actions taken under the transition rules to the extent such amendments or actions do not affect the plan's compliance with section 409A and these regulations for periods on or after January 1, 2009. For example, if a plan contains a haircut provision permitting an immediate distribution contingent on the forfeiture of a certain portion of a deferred amount, the haircut provision need not be removed retroactively for periods before January 1, 2009, where the plan has been operated in compliance with the applicable transition guidance (and thus no payment pursuant to the haircut provision has been made after December 31, 2004). In addition, a plan need not be amended to be made compliant with section 409A with respect to amounts deferred under the plan that were paid on or before December 31, 2008, in compliance with the transition guidance. However, the taxpayer must be able to demonstrate that the plan was operated in compliance with the transition guidance, including demonstrating that amounts were deferred or paid in compliance with the transition rules. For example, where payments were made in conjunction with elections of payment dates by either the service recipient or service provider during the transition period, the taxpayer must be able to demonstrate that the elections were provided and made in accordance with the transition rules."

[Guest Guy Incognito]

Thanks for the responses.