IRS Notice 2010-6 previously provided guidance concerning how to make payment of nonqualified deferred compensation that is subject to the signing of a release complaint with Section 409A.
Essentially, it provides that a plan may not allow an employee to delay or accelerate the timing of a payment as a result of the employee’s actions (such as signing a release), provided, however, that if the plan provides for payment (subject to the employee’s action) within a designated period following the permissible payment event under Section 409A, the plan must provide for payment only on the last day of such designated period.
If the plan does not provide for payment (subject to the employee’s action) within a designated period following the permissible payment event under Section 409A, the plan must provide for payment only upon a fixed date either 60 or 90 days following the occurrence of the permissible payment event. Notice 2010-80 modifies this guidance by providing an additional method to make the payment of deferred compensation contingent upon an employee’s actions, such as signing a release, compliant with Section 409A (and an additional method to correct certain document failures involving payments contingent upon an employee’s actions). Under this additional method, a plan may provide for payment during a specified period not longer than 90 days following a permissible payment event, provided that if the period begins in one year and ends in the subsequent year, the payment must be made in the subsequent year.
With respect to correcting plans to comply with this guidance in Notice 2010-80, Notice 2010-80 contains significant transition relief concerning the date by which plans must be amended. This is a general summary of the modified procedure. Jackson Lewis attorneys are available to answer your questions about the Section 409A correction procedures.