On October 22, 2007, the Treasury Department and the Internal Revenue Service (IRS) extended additional compliance relief from Section 409A of the Internal Revenue Code (IRC) with publication of Notice 2007-86. Specifically, January 1, 2009, is now the new effective date for compliance with the final regulations for nonqualified deferred compensation plans. The transition relief scheduled to expire on December 31, 2007, is now extended to December 31, 2008. This supersedes prior operational and documentary compliance deadlines set by the IRS, including Notice 2007-78 released in September 2007.

Until January 1, 2009, plans must be operated and administered consistent with the plan's terms, to the extent those terms are consistent with the appropriate guidance, including Notice 2005-1. To the extent an issue cannot be resolved based on Notice 2005-1 or other applicable guidance, plan sponsors must apply a reasonable good faith interpretation of the appropriate guidance in resolving the issue.

Companies still need to take necessary action steps in the remaining months of 2007, including:

• Informing plan participants of 2008 deferral and distribution elections
• Allowing plan participants to update distribution elections for amounts subject to Section 409A

Remember that distribution elections for amounts subject to 409A generally may be updated without penalty for amounts payable in 2009 or beyond.