News & Information

 

FEATURED PRODUCT

5500 Preparer's Manual for 2012 Plan Years

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

CCH® PENSION — 01/13/10

IRS Offers Voluntary Correction Program For Document Failures Under Deferred Comp Plans

from Spencerís Benefits Reports: In Notice 2010-6, the Internal Revenue Service provides methods for taxpayers to voluntarily correct many types of failures to comply with the document requirements applicable under IRC Sec. 409A to nonqualified deferred compensation plans and thereby avoid or reduce the current income inclusion and additional taxes under Sec. 409A.

Sec. 409A generally provides that amounts deferred under a nonqualified deferred compensation plan for all taxable years are currently includible in gross income to the extent not subject to a substantial risk of forfeiture and not previously included in gross income. Sec. 409A further provides that amounts includible in income under that section are subject to two additional taxes: a 20% additional tax and an additional tax calculated as the underpayment interest rate that would have been due had the amounts deferred been includible in income when first deferred or first no longer subject to a substantial risk of forfeiture, whichever is later. Thus, a failure to comply with the requirements of Sec. 409A can have severe adverse tax consequences.

The document correction program is intended to encourage taxpayers to review nonqualified deferred compensation plans to identify provisions that fail to comply with the requirements and regulations of Sec. 409A, and to correct those plan provisions promptly, while also not providing an advantage to taxpayers participating in plans that initially fail to comply with Sec. 409A over taxpayers participating in plans drafted in compliance with Sec. 409A. Accordingly, Notice 2010-6 provides the following:

Notice 2010-6 also clarifies certain aspects of Notice 2008-113, which addresses certain failures of nonqualified deferred compensation plans to comply with Sec. 409A in operation, including clarification of the following issues:

Comments RequestedIn Notice 2010-6, the IRS requests comments regarding other document failures that commonly occur under nonqualified deferred compensation plans and methods to correct them. Comments must be submitted by April 5 to the IRS, CC:PA:LPD:RU (Notice 2010-6), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions also may be submitted to the following email address: Notice.comments@irscounsel.treas.gov. Include the notice number (Notice 2010-6) in the subject line. For further information, contact Keith Ranta at (202) 927-9639.

 

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

Visit our News Library to read more news stories.