Post 2005 plan terminates before 12/31/08 amendment deadline

[Guest long]

Employee has a post-2005 employment agreement with deferred comp provisions. He and the employer have agreed to terminate the agreement (with no deferred comp being paid out) before 12/31/08. Does the plan need to be amended to comply with IRC 409A?

[Guest long]

Employee has a post-2005 employment agreement with deferred comp provisions. He and the employer have agreed to terminate the agreement (with no deferred comp being paid out) before 12/31/08. Does the plan need to be amended to comply with IRC 409A?

After looking further, I believe that such a terminating plan must be amended to comply with 409A based on language in IRS Notice 2007-86 -- sect. 3.01(B) stating that plans adopted before 12/31/08 will not be deemed in violation of 409A if they are (1) operated in compliance with 409A through 12/31/08 and (2) amended on or before 12/31/08 to conform to 409A. It seems this would apply to any 409A-covered plan, even if it were terminated prior to the deadline for amending the plan. I'd be interested if any any others have come across this issue.

[Guest Benefitsrock]

Assuming the plan has been operated in compliance with the transition guidance, if all amounts deferred under the plan are paid out in accordance with the terms of the plan and 409A before December 31, 2008, the written document does not have to be amended to comply with 409A’s documentary requirements. See Powell Goldstein’s October 25, 2007 memo, IRS Releases Notice 2007-86: Additional Transition Relief Through 2008, and Watson Wyatt’s November 2007 memorandum, Summary of 409A Compliance Deadline Extensions.

[Guest long]

Assuming the plan has been operated in compliance with the transition guidance, if all amounts deferred under the plan are paid out in accordance with the terms of the plan and 409A before December 31, 2008, the written document does not have to be amended to comply with 409A’s documentary requirements. See Powell Goldstein’s October 25, 2007 memo, IRS Releases Notice 2007-86: Additional Transition Relief Through 2008, and Watson Wyatt’s November 2007 memorandum, Summary of 409A Compliance Deadline Extensions.

Thanks. One followup. If the arrangement is terminated, I believe that the termination must comply with 409A and therefore, per the aggregation rules, all similar plans re this employee must also be terminated. Correct?