Treatment of Deferral Elections After Plan Termination

[Guest BenefitsJrAssociate]

I am dealing with a situation where a NQDC plan is going to be terminated pursuant to §1.409A-3(j)(4)(ix). My question is, where the plan (and all other plans aggregated under §1.409A-1©(2)) is terminated prior to the end of the year, how are employee deferral elections for the year of termination treated after the date of plan termination? The following language from the preamble to the final regulations suggests that the termination should be treated as a cancellation of an employee’s deferral election effective as of the date of the plan’s termination: “The termination and liquidation of a nonqualified deferred compensation plan involves both the amendment of the plan to cease deferrals under the plan and provide for payment of all benefits accrued under the plan, and the accelerated payment of benefits accrued under the plan.” See §VIII(B) (first paragraph) of the preamble. Is anyone aware of any other guidance on this issue? Will the answer vary depending on whether the plan termination is under the general rule (§1.409A-3(j)(4)(ix)©) or following a change in control under 1.409A-3(j)(4)(ix)(B)?

Any feedback would be greatly appreciated.