The IRS has granted another extension to full implementation of Section 409A. This extension was sought by law firms on behalf of their large clients. Highlights of the extension include:

• extends employer compliance of deferred compensation plans through December 31, 2008
• delays the requirement that the plan must be in writing until December 31, 2008
• continues the good faith compliance rule for issues not addressed in Notice 2005-1
• allows the cancellation and reissuance of stock options before December 31, 2007 if the options would have violated Section 409A

For more information on Section 409A and NQDC, visit compenomics for more.

IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.

The IRS has offered a way for employers who issued backdated stock options to rank-and-file employees to lighten their tax burden. It's a blue-light special in that employers who accept the deal have to do so by February 28. The deal allows companies to pay a potentially hefty tax on behalf of employees who exercised tainted options in 2006. This doesn't extend to top executives and corporate insiders; they're on their own. The additional tax has incurred under Section 409A as a result of exercising discounted stock options and stock appreciation rights in 2006.

To take advantage of the program, an employer must submit an initial notice of intent to the IRS by February 28,2007. Then they must notify affected employees and make an additional filing with IRS by March 15, 2007. The program allows employers to remit applicable taxes under Section 409A on behalf of the employee. This includes the 20% tax and the interest-based tax, but not the ordinary income tax. The tax must be in the hands of the IRS by June 30, 2007. If an employer accepts these terms, then they are not required to report the 409A amounts in box 12 of the employee's W-2 for 2006. Affected employees will receive a corrected W-2 and those who have filed their 2006 taxes will need to file an amended return.

For more information on Section 409A and NQDC, visit compenomics for more.

IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.

Whether you call them IT Support Specialists, IT Analysts, or Help Desk Specialists, the Department of Labor calls them non-exempt. In an opinion letter issued this fall, DOL stated that those employees whose job it is to troubleshoot computer hardware and software problems do not meet the computer employee exemption. Long story short: they must be paid by the hour and paid overtime. Even though they are diagnosing computer problems, they aren't originating techniques and applications to do so. They are working from a checklist they didn't create.

For those of you who have classified your computer support employees as exempt, review those jobs again. Chances are you need to make changes. Better you know and act before plaintiff's attorney knows and acts.

There was a big sigh of relief on October 4 when the IRS extended Section 409A compliance until December 31, 2007. But what the bold print give, the fine print take away. This extension does not include backdated options/SARs granted to public company insiders (Section 16(a)). However, all other NQDC arrangements have until December 31, 2007 to come into full compliance.

What do I do now? Operate your NQDC plans in reasonable, good compliance. Be aware of the terms of your deferred compensation plans and the operational requirements of Section 409A. As long as you can demonstrate movement toward compliance, you have until December 31, 2007 to get there.

For more information on Section 409A and NQDC, visit compenomics for more.

IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.

It's usually the CEO or CFO who takes the perp walk in front of the cameras, but now it's HR's turn. Stephanie Jensen, former human resource director at Brocade Communications, was indicted on charges of criminal securities fraud. The SEC claims she falsified financial records in order to boost executive compensation as well as entice candidates to join the company.

The SEC isn't buying the story that she was just following orders. As a former human resource director at a public company, I'm skeptical too. A director is expected to speak up if she thinks the company is about to drive into a ditch. She also has access to "experts" - in-house counsel, outside counsel, auditors. When I felt the topic warranted a second opinion, I'd check my understanding against theirs. It's an open book test, just start opening books. Maybe Stephanie will have a smoking memo that places the blame on someone else, but if she winged it and thought it was no big deal, these past few weeks must have been a rude awakening.