On April 17, 2007, the Internal Revenue Service (“IRS”) published final regulations under Section 409A of the Internal Revenue Code (“Section 409A”). The final regulations are effective January 1, 2008 but may be relied upon as early as April 17, 2007. The current “good faith” compliance standard for Section 409A remains in effect for the remainder of 2007.

Employers should immediately begin to identify all compensation arrangements which may be subject to Section 409A. All arrangements must be reviewed to determine whether they qualify for an exemption from Section 409A coverage. If they are subject to Section 409A, they must be reviewed to determine whether they must be amended by December 31, 2007. The “good faith” compliance standard may not be relied upon once the final regulations become effective January 1, 2008. Employers should begin to act now to ensure compliance with Section 409A.