What Arrangements Are Subject to the New Law?
Section 409A generally applies to amounts deferred or vested after December 31, 2004. To avoid the new rules of Section 409A, prior amounts must be both earned and vested by December 31, 2004. A plans old rules can continue to apply to such preJanuary 1, 2005, deferrals (and earnings on such deferrals). There is, however, a significant catch to this rule. If an employer materially modifies a grandfathered plan, the plan will become subject to the new rules. The Section 409A rules apply to independent contractors and other persons or entities providing services to the business that is paying the deferred compensation (and receiving the services). In the parlance of the proposed regulations, Section 409A applies to all service providers (e.g., employees) and to service recipients (e.g., employers). In this summary, we will use the terms employee (or participant) and employer, but it is important to remember that the rules apply to other business service relationships. The proposed regula
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- What Arrangements Are Subject to the New Law?
