Sec. 409A's application deferred.

• Author: Laffie, Lesli S.
• Position: FROM THE IRS

Notice 2006-79 extends the effective date and transition relief for most nonqualified deferred compensation arrangements under Sec. 409A from Jan. 1, 2007 to Jan. 1, 2008. This extension does not apply to certain discounted stock options subject to backdating concerns.

Sec. 409A final regulations are expected to be published by the end of 2006, and companies must meet the Sec. 409A requirements in good faith.

Initial guidance on Sec. 409A, which was enacted by the American Jobs Creation Act of 2004, was published in December 2004 as Notice 2005-1 (modified in January 2005); proposed rules were later issued (REG-158080-04, 10/4/05). (For coverage, see Singer, "Deferred Compensation for Executives under Sec. 409A," Part I, TTA, July 2006, p. 402, and Part II, TTA, August 2006, p. 476.)

Stock options and SARs relief: Notice 2006-79 states that the transition relief does not extend to stock options or stock appreciation rights (SAILs) that:

* Were granted for stock...