Life insurance groups, as well as the legal community, remain hopeful that the Treasury Department and Internal Revenue Service will issue a full, one-year extension of the effective date of the final rules on nonqualified deferred compensation plans under Code section 409A.
Currently, the new regulations are scheduled to be effective Jan. 1, 2008.
Sec. 409A covers many deferred compensation contracts, for example, some split-dollar life insurance arrangements, stock option plans and severance benefits–that have not traditionally been thought of as providing deferred compensation, according to Larry Raymond, president of the Association for Advanced Life Underwriting.
The AALU is one of the groups lobbying the agencies for a full-year deferral. Besides the insurance industry, these include the American Bar Association’s Section of Taxation and a group of 96 prominent law firms.
Raymond explained that many employers use life insurance as a means of financing deferred compensation plans. “It is important that employers have sufficient time to take the difficult and significant steps required for compliance with very complicated rules,” he said.
The final regulations were published in April.