Nonqualified deferred compensation plan with expiration date

[mariemonroe]

If an employer adopts a NQDC Plan with a built in expiration date int he plan document, does the employer have to wait 36 months after the plan expires to adopt a new plan? Or can it do so immediately upon expiration of the old plan?

[Artie M]

I don't have any authority for this statement but, if I am understanding you correctly, my thought would be that you could immediately put in a new plan.  If the plan has a "built in expiration date" that means to me that all amounts deferred under the plan must be distributed (or commence to be paid with installments, hopefully, being treated as a single payment) at the latest on the plan expiration date -- otherwise, how can it expire?  If this is the case, then all amounts deferred under the plan are being paid on the later of ____ and a specified date (i.e, the termination date).  Accordingly, the plan termination rules of 409A would not be implicated because there is no acceleration of payments.  Note that these termination rules fall under the regulations for "Permissible Accelerations of Deferred Amounts.".  Since all the payments will be made under their terms without any acceleration, there should be no timing restriction with putting in a new plan.

[EBECatty]

I agree but probably couldn't put my finger on anything specifically saying as much. As Artie notes, the three-year restriction deals with plan terminations and liquidations that accelerate payments to a date earlier than the date they otherwise would be paid under the terms of the plan.  

It could depend on the plan terms. In addition to Artie's example, say a plan provides that if an employee meets a performance target over years 1-3, she will receive deferred payments in years 4-10. If the employee doesn't meet the performance target by the end of year 3, the plan expires and no payments are made. If the target isn't met and the plan expires, I'd have no problem starting a new, identical plan the first day of year 4.