Bringing Non-qualified Deferred Compensation Plans into Compliance

If your organization offers non-qualified deferred compensation plans to your staff – you should seriously consider making the necessary adjustments to come into compliance while you can. The great news is – IRS Notice 2010-6 establishes a new correction program that you can use to voluntarily correct “document failures” allowing you to reduce and/or avoid harsh penalties.

To be eligible for the program, neither you nor the employees to whom the program applies can be under audit by the IRS. Furthermore, you must:

  • Have inadvertent and unintentional document failures
  • Correct all deferred compensation arrangements with the same error

Certain terms won’t be treated as a failure as long as the plan is operated in accordance with section 409A. Correctable failures include:

  • Definitions of separation from service; disability, or change in control
  • Payment events or payment schedules
  • Initial or subsequent deferral election procedures

Adapted from New Plan Correction Program; published by Hoffman, Stewart & Schmidt, P.C. Newsletter. For more information, click here.

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