IRS to Waive 2008 Deferred Comp Code Y Reporting - 29-Oct, 2008

IRS to Waive 2008 Deferred Comp Code Y Reporting

http://www.planadviser.com/article.php/3047

Fred Schneyer – 10/27/2008

The
Internal Revenue Service (IRS) will waive the requirements for Code Y
reporting in 2008 of amounts deferred under 409A for nonqualified
deferred compensation plans (NQDC).

According
to a BNA news report, Treasury Deputy Benefits Tax Counsel Helen H.
Morrison said in a recent Clark Consulting Webinar that the IRS expects
to issue a notice before the end of 2008 waiving the requirement for
reporting this year, "and until such time as we have issued regulations
on how to calculate the amount that would be included in income."

Morrison also said the Treasury expects to soon
issue proposed regulations on how to calculate amounts that would be
included in income due to a failure to meet 409A requirements. The
proposed regulations will also "serve as a foundation for providing
guidance as to what would be reported for compliant plans," using Code
Y on Form W-2, she said.

If a plan fails to comply with the regulations, the
employer must report amounts includible in income on Form W-2 in Box
12, using Code Z. In the case of plan failure, the employee would be
subject to immediate income inclusion and penalties, including an
additional 20% tax and, in certain cases, an interest tax.

Addressing other year-end issues, Morrison said all
plan documents and final elections as to time and form of payment must
be completed and reduced to writing by the end of this year.

Regarding plan documents, Morrison said Section 409A imposes few requirements, "but they are important," including:

• the plan document need not be a single document;


• the
  plan document must address time and form of payment and when payment
  will be made in accordance with the six permissible payment times;


• elections must be made in accordance with the regulations and in writing;


• public companies must provide for a six-month delay in payment in connection with a separation from service.

More information from the Webinar is available here.