The IRS recently issued
Notice 2007-100, which gives employers an opportunity to correct unintentional
operational mistakes concerning nonqualified deferred compensation plans.
Internal Revenue Code Section 409A, which covers these plans, specifies the
manner in which they must be reported to avoid premature taxation. The notice gives
employers the opportunity to self-correct unintentional operational errors—the
failure to comply with Section 409A(a) in operation—that 1) are corrected
within the taxable year that they occurred; and 2) are not corrected in the
same taxable years in which they occur if the failures occur before 2010.
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Unintentional operational
mistakes may include premature payments of amounts that should have been deferred,
deferrals that should have been paid, and not delaying payments for six months
on an employee’s eligibility to receive the compensation. It’s important to
note that this notice only covers operational errors. If, for example, the plan
documents contain erroneous provisions, the notice will not apply.