*December 31, 2008
403(b) Compliance Deadline. All 403(b) tax-deferred annuity or custodial account arrangements must be in compliance with comprehensive new federal IRS regulations by year end. This will require public schools and other government or 501(c)(3) employers offering a 403(b) arrangement to have a new 403(b) plan document in place by year end, as well as updated annuity contracts, if necessary, and appropriate procedures and controls for monitoring and ensuring compliance with 403(b) requirements and obtaining necessary information and cooperation from 403(b) vendors.
*December 31, 2008
409A Compliance Deadline for Compensation Arrangements. A broad new federal tax provision (Internal Revenue Code § 409A) could result in employees and executives being subject to an extra 20% excise tax on their compensation if steps are not taken to amend any affected compensation arrangements by year end. The sweep of this new tax provision is extremely broad, potentially affecting employment agreements, bonus arrangements, severance or wage continuation provisions, equity compensation such as stock options or stock bonus awards, supplemental executive retirement arrangements or promises, health care continuation provisions other than required COBRA continuation coverage, and any other type of payment that could be considered compensation attributable in whole or in part to prior years’ service. The new 409A regulations issued by the IRS last fall are extremely voluminous and complicated. Therefore, the time to start reviewing any potentially affected arrangements or agreements to ensure year end compliance is now.
About the Authors: Lesley A. Russo is a partner in the Charleston office of Bowles Rice and the leader of the Bowles Rice Employee Benefits and Executive Compensation Group. Erin C. V. Bailey, an associate in the firm's Charleston office, also is a member of the Bowles Rice Employee Benefits and Executive Compensation Group.
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