2009 Offers Section 409A Correction Opportunities

As employers come to grips with the new inflexibility of fully implemented section 409A requirements, potential section 409A violations and resulting adverse tax consequences are becoming a reality. Even so, there are some tools available for addressing section 409A compliance failures that can limit, and in some cases eliminate, the adverse tax consequences associated with an inadvertent failure to follow the rules under section 409A. In Notice 2008-113, the IRS provided lengthy and detailed guidance for operational failures that are fixed within certain limited periods following the occurrence of the failure. It is important to note however, that Notice 2008-113 generally does not offer relief with respect to a failure to satisfy the documentary requirements of section 409A. In addition, as discussed below, a special opportunity for correction during 2009 is provided, but the opportunity requires action in 2009.

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