IRS to Shine Light on Deferred Comp: The compliance window for the Deferred Compensation Plan is closing soon - and this time the IRS means it.(United States. Internal Revenue Service)(Internal Revenue Code)

Private equity firms and their portfolio companies have no further time to postpone reviewing their deferred compensation arrangements. That applies to both those arrangements that they and their employees recognize as deferring compensation and those that the IRS might interpret to do so, notwithstanding how counterintuitive the IRS's conclusion may be to the rest of the world.

In 2004, Congress enacted Section 409A of the Internal Revenue Code, imposing an entirely new regulatory regime on "deferred compensation," which is generally defined under the statute to cover any promise made in one year to pay compensation in a future year.

Because of the breadth and complexity of the statute, and because the IRS's own views on the statute have evolved since its enactment, the IRS initially established, and then extended, a period of transition relief during which deferred compensation plans were not required to be in documentary compliance with the statute. The transition relief is set to expire on December 31, 2008. IRS officials have stated that the period of transition relief is not likely to be extended, notwithstanding many …