The Pension Protection Act Blog

In unequivocal terms today, the IRS extended the deadline to comply with the new Final 409A Regulations from December 31, 2007, to December 31, 2008, for most provisions of these regulations.

In Notice 2007-86, the IRS states that the transition relief scheduled to expire on December 31, 2007, is extended to December 31, 2008. In doing so, the IRS expressly revoked and superceded the transition relief provided in Section III of Notice 2007-78, stating that the relief provided in Section III of Notice 2007-78 did not provide sufficient relief for plan sponsors and service providers to make informed and reasoned decisions before the deadline.

Not everything has been extended. The extension does not apply to predetermined cashout features, or the application of Section 409A(b) for restrictions on certain trusts and other arrangements, as stated in Section IV of Notice 2007-78.

The IRS also provides guidance in Notice 2007-86 on applying this relief. In 2008, plans are to be operated in compliance with the plan’s terms, and consistent with Code section 409A and Notice 2005-1. Where a provision of Notice 2005-1 is inconsistent with the final regulations, the Service states that the plan sponsor may rely upon either Notice 2005-1 or the final regulations. To the extent that an issue is not addressed in Notice 2005-1 or other applicable guidance, the Service states that the plan sponsor must apply a reasonable, good faith interpretation of the statute. Relying on the Final 409A regulations will be treated by the Service as applying a reasonable, good faith interpretation of the statute.

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