Nonqualified Deferred Compensation Reporting Requirements Delayed
EXECUTIVE AND STOCK BASED COMPENSATION
- December 31, 2012, Deadline for Correcting Section 409A Document Failures for Payments at Separation from Service that are Contingent on Submission of a Release of Claims
- CAUTION: Ten Common 409A Errors!
- Updating Compensation Committee Responsibilities and Charter for Shareholder Advisory Votes on Executive Compensation and Golden Parachute Payments
- IRS Issues Voluntary Correction Program for Section 409A Plan Document Failures: Time to Find and Fix Problems during IRS Transition Relief Period
- Federal Reserve Sheds Light on How to Evaluate and Manage Risk in Incentive Compensation Policies
- Severance Plans — Regulated by the Internal Revenue Code and ERISA
- Executive Compensation In 2009
- IRS Publishes Guidance on 2007 Tax Reporting and Withholding Requirements under Code Section 409A
- Special Alert — It's the Thought that Counts: Limited Transition Relief and Additional Guidance Under 409A
- Legislative Curtailment of Nonqualified Deferred Compensation Imminent?
- IRS Publishes Guidance on Reporting and Withholding Requirements under Code Section 409A
- New Executive Compensation Disclosure Rules
- Criminal and Civil Charges Brought in Stock Option "Backdating" Scheme — The SEC and DOJ Get Serious!
- Severance Plans: The New Nonqualified Deferred Compensation
- Proposed Executive Compensation Proxy Disclosure Rules: What to Do Before the Rules Become Final
- Impact of Code Section 409A and the Newly Proposed Regulations on Equity Compensation Arrangements
- Impact of the American Jobs Creation Act of 2004 on Equity Compensation
- The Shift Away from Stock Options Requires Companies to Reconsider Section 162(m) Compliance
- Proposed Legislation Affecting Nonqualified Deferred Compensation Arrangements
- New Proposed Regulations Regarding Statutory Stock Options
Effective for calendar year 2005, the IRS has suspended the rules requiring companies to report amounts deferred or accrued under nonqualified deferred compensation plans on Forms W–2 and 1099–MISC. New rules under Internal Revenue Code sections 6041 and 6051 (which were enacted as part of the American Jobs Creation Act of 2004) require that companies report each year:
- for informational purposes only, the total amount of deferrals (or accruals) and earnings thereon attributable to a participant in a nonqualified deferred compensation plan; and
- the total amount includible in a participant’s income under new Code section 409A that the participant has not actually or constructively received.
The new reporting rules were effective for calendar year 2005 but the IRS has suspended the reporting requirement until further guidance on the valuation and calculation of the reportable amounts is issued. This guidance is expected in the first half of 2006.
Even though the IRS suspended the reporting requirements in Notice 2005–94, the IRS has left open the possibility that companies may be required to issue amended W–2s and 1099s to comply with the new reporting requirements. Therefore, companies should continue to work toward compliance with the new rules. Also, if a plan participant is required to include in income amounts subject to Code section 409A that the participant has not otherwise reported on his or her Form 1040, the participant will likely be required to file an amended income tax return for calendar year 2005.
Important Note: The rules under Code section 3121(v)(2) requiring participants to pay FICA tax on amounts deferred and accrued under nonqualified deferred compensation plans are not affected by this new guidance and the existing rules continue to apply in all respects.
Remember that all affected nonqualified deferred compensation plan documents, including many equity compensation plans, severance plans, change in control plans and employment agreements, must be revised to comply with Code section 409A before December 31, 2006. Please contact us with your questions regarding the application of Code section 409A to your deferred compensation, equity compensation, and other affected arrangements.
Copyright © 2006 Trucker Huss. All rights reserved. This article is published as an information source for our clients and colleagues. The article is current as of the date shown above, is general in nature and is not the substitute for legal advice or opinion in a particular case. In response to new IRS rules of practice, we inform you that any federal tax information contained in this writing cannot be used for the purpose of avoiding tax-related penalties or promoting, marketing or recommending to another party any tax-related matters in this writing.