Do The Pre-409A Tax Principles Still Apply?
Yes. Historic tax principles, such as the constructive receipt, economic benefit and assignment of income doctrines, still apply and may require inclusion in income at a date earlier than Code section 409A. Tax-exempt and governmental deferred compensation plan sponsors also must deal with the rules under Code section 457(f). When Is Code Section 409A Effective? Code section 409A is effective for amounts deferred on or after January 1, 2005. Amounts will not be considered deferred prior to that date unless the service provider has a legally binding right to the amount and it is earned and vested as of December 31, 2004. Code section 409A also applies to compensation deferred before January 1, 2005 if the plan is materially modified (amended to provide an enhanced or new benefit or right) after October 3, 2004. When Does An Existing Plan Have To Comply? Sponsors generally have until December 31, 2008 to amend their pre-2005 deferred compensation plans to comply with Code section 409A or
