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Application of Section 409A to Nonqualified Deferred Compensation Plans; Correction

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Internal Revenue Service (IRS), Treasury.


Correcting amendment.


This document contains corrections to final regulations (TD 9321) which were published in the Federal Register on April 17, 2007 (72 FR 19323). The final regulations relate to section 409A and nonqualified deferred compensation plans.


This correction is effective September 24, 2008, and applicable on April 17, 2007.

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Guy R. Traynor, (202) 622-3693 (not a toll-free number).

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The final regulations that are subject to this document are under section 409A of the Internal Revenue Code.

Need for Correction

As published, final regulations (TD 9321) contain errors that may prove to be misleading and are in need of clarification.

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List of Subjects in 26 CFR Part 1

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Correction of Publication

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Authority: 26 U.S.C. 7805 * * *

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Application of section 409A and effective dates.
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(i) Nonaccount balance plans. The amount of compensation deferred before January 1, 2005, under a nonqualified deferred compensation plan that is a nonaccount balance plan (as defined in § 1.409A-1(c)(2)(i)(C)), equals the present value of the amount to which the service provider would have been entitled under the plan if the service provider voluntarily terminated services without cause on December 31, 2004, and received a payment of the benefits available from the plan on the earliest possible date allowed under the plan to receive a payment of benefits following the termination of services, and received the benefits in the form with the maximum value.

Notwithstanding the foregoing, for any subsequent taxable year of the service provider, the grandfathered amount may increase to equal the present value of the benefit the service provider actually becomes entitled to, in the form and at the time actually paid, determined under the terms of the plan (including applicable limits under the Internal Revenue Code), as in effect on October 3, 2004, without regard to any further services rendered by the service provider after December 31, 2004, or any other events affecting the amount of or the entitlement to benefits (other than a participant election with respect to the time or form of an available benefit). For purposes of calculation the present value of a benefit under this paragraph (c)(3)(i), reasonable actuarial assumptions and methods must be used. Whether assumptions and methods are reasonable for this purpose is determined as of each date the benefit is valued for purposes of determining the grandfathered benefit, provided that any reasonable actuarial assumptions and methods that were used by the service recipient with respect to such benefit as of December 31, 2004, will continue to be treated as reasonable assumptions and methods for purposes of calculating the grandfathered benefit.

Actuarial assumptions and methods will be presumed reasonable if they are the same as those used to value benefits under a qualified plan sponsored by the service recipient the benefits under which are part of the benefit formula under, or otherwise impact the amount of benefits under, the nonaccount balance nonqualified deferred compensation plan.

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Guy R. Traynor,

Federal Register Liaison, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).

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[FR Doc. E8-22383 Filed 9-23-08; 8:45 am]