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Updates
Internal Revenue Code Section 409A provides new rules regulating "deferred compensation." The rules govern the timing and form of deferred compensation elections. The rules also cover distributions of deferred compensation—including certain non-qualified pension programs.
Employers worldwide have until 31 December 2008 to review, inventory and bring their deferred compensation arrangements into compliance with Section 409A to avoid violations of these tax regulations.
Section 409A requires companies that receive personal services from a U.S. tax-paying employee to:
- Document, in advance of the services, any arrangement used to defer receipt of any of the compensation earned by the worker and follow specific rules when making any elections to further defer that compensation.
- Document, in advance, when such deferred compensation can be paid and follow strict rules that limit the circumstances under which the worker can be paid such deferred compensation.
- Limit the types of funding arrangements that can be used to make payment.
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