n-10-80.pdf

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Part III – Administrative, Procedural, and Miscellaneous

Notice 2010-80

Modification to the Relief and Guidance on Corrections of Certain Failures of a
Nonqualified Deferred Compensation Plan to Comply with § 409A(a)

I. PURPOSE
This notice modifies certain provisions of Notice 2008-113, Relief and Guidance
on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to
Comply with § 409A(a) in Operation, 2008-2 C.B. 1305, and Notice 2010-6, Relief and
Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation
Plan to Comply with § 409A(a), 2010-3 I.R.B. 275. Specifically, this notice:
• Clarifies that the types of plans eligible for relief under Notice 2010-6 include a
nonqualified plan linked to a qualified plan or another nonqualified plan, provided
that the linkage does not affect the time and form of payments under the plans;
• Expands the types of plans eligible for relief under Notice 2010-6 to include
certain stock rights that were intended to comply with the requirements of
§ 409A(a) of the Internal Revenue Code (rather than be exempt from the
requirements of § 409A(a));
• Provides an additional method of correction under Notice 2010-6 for certain
failures involving payments at separation from service subject to the requirement
to submit a release of claims or similar document; and provides transition relief
permitting the correction of such failures that were in effect on or before
December 31, 2010 (including relief from the service provider information
reporting requirements);

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• Provides relief from the service provider information reporting requirements
under Notice 2010-6 for corrections made under the transition relief ending
December 31, 2010; and
• Provides relief from the requirement that service recipients provide certain
information to service providers under Notice 2008-113 for corrections made in
the same taxable year as the failure occurs.
II. BACKGROUND
On December 3, 2008, the Treasury Department and the IRS issued Notice
2008-113, providing relief and guidance on corrections of certain failures of a
nonqualified deferred compensation plan to comply with the operational requirements
applicable under § 409A(a). On January 5, 2010, the Treasury Department and the IRS
released Notice 2010-6, providing relief and guidance on corrections of certain failures
of a nonqualified deferred compensation plan to comply with the plan document
requirements applicable under § 409A(a). Section XI of Notice 2010-6 provided
transition relief under which taxpayers generally could avoid income inclusion under
§ 409A(a) solely due to the failure of the plan language to comply with the requirements
of § 409A(a), if the plan document failure and any related operational failure were
corrected before January 1, 2011 in accordance with the guidance (although an amount
may be required to be included in income under § 409A(a) due to the correction of the
related operational failure).
The Treasury Department and the IRS received numerous comments on the
guidance regarding the correction of failures to comply with § 409A(a). The Treasury
Department and the IRS continue to analyze the comments and anticipate issuing

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further corrections guidance in the future. However, because certain transition relief
provided in Section XI of Notice 2010-6 requires correction of plan document and
related operational failures before January 1, 2011, the Treasury Department and the
IRS are issuing this guidance to provide immediate relief to taxpayers with respect to
certain issues under Notice 2008-113 and Notice 2010-6.
III. GUIDANCE
A. This § III.A. clarifies § III.G. of Notice 2010-6 by providing that the types of plans
eligible for relief under Notice 2010-6 include (1) certain linked plans with plan
document failures if the linkage does not affect the time and form of payment of
amounts under the plans, and (2) certain stock rights (stock options and stock
appreciation rights) that were intended at the time of grant (or upon a modification
pursuant to applicable transition relief) to be subject to, and compliant with, § 409A but
that have a plan document failure. Accordingly, § III.G of Notice 2010-6 is modified to
read as follows:
“G. Certain Linked Plans and Stock Rights not Eligible for Relief

Except as specifically provided in § XI.B of this notice, the relief provided under
this notice does not apply to a plan to the extent that the document failure is due to the
time and form of payment being affected by the amount deferred under, or the payment
provisions of, one or more other nonqualified deferred compensation plans or one or
more qualified plans (as defined in §1.409A-1(a)(2)). However, a plan does not fail to
qualify for the relief provided under this notice merely because the amount paid under
one plan is affected by the amount paid under the other plan, provided the time and
form of payment under the first plan is not affected by the amount deferred under, or the

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payment provisions of, the other plan. In addition, the relief provided under this notice
does not apply to a stock right (as defined in §1.409A-1(l)) unless pursuant to the terms
of the stock right at the time of grant or as modified in accordance with applicable
transition relief, the recipient of the stock right has the right to exercise such stock right
only upon one or more of the following: (1) a fixed date or a period beginning and
ending within one taxable year (generally the calendar year for individual taxpayers); or
(2) a permissible payment event under § 409A and §1.409A-3(a) (including any period
following a payment event permitted under §1.409A-3(b)). For this purpose, a
permissible payment event under § 409A and 1.409A-3(a) includes a payment event
eligible for correction under §§ IV and V of this notice. For example, the relief provided
under this notice would apply to a stock right subject to § 409A granted to an employee
with a calendar year taxable year, where the right had an exercise date of the earlier of
a fixed date or the period beginning with the employee’s separation from service and
ending on December 31 of the calendar year in which the employee separated from
service, provided that the definition of separation from service either complied with the
requirements of §1.409A-1(h) or was eligible for correction under § V.A of this notice.
For certain relief with respect to a stock right with an exercise price that is less than the
fair market value of the underlying shares of stock at the date of grant, see Notice
2008-113, §§ IV.D and V.E.”
B. This § III.B modifies § VI.B.2 of Notice 2010-6 by providing an additional method of
correction for certain failures involving payments dependent upon the service provider
completing certain employment-related actions (such as the execution and submission
of a noncompetition agreement, a nonsolicitation agreement, or a release of claims).

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Under this additional method, the failure may be corrected by providing for payment
during a specified period not longer than 90 days following a permissible payment
event, provided that if the period begins in a service provider taxable year and ends in
the subsequent service provider taxable year, the payment will be made in the
subsequent taxable year. Accordingly, § VI.B.2 of Notice 2010-6 is modified to read as
follows:
“2. Correction
A plan provision eligible for this section may be corrected in accordance with this
section before the date an event occurs that would be a permissible payment event
under § 409A to which the provision applies. The plan may be corrected by amending
the plan to remove the ability of the service provider to delay or accelerate the timing of
the payment as a result of the service provider’s action. If the plan provides for
payment (subject to the service provider’s action) within a designated period following
the permissible payment event under § 409A that is a permissible payment period under
§1.409A-3(b), except that the service provider’s action could affect the taxable year of
payment, the amendment must provide either (a) for payment only on the last day of
such designated period, or (b) for payment in the second taxable year if in any event the
designated period begins in a first taxable year and ends in a second taxable year. If
the plan does not provide for payment (subject to the service provider’s action) within a
designated period following the permissible payment event under § 409A that is a
permissible payment period under §1.409A-3(b), the amendment must provide either (a)
for payment only upon a fixed date either 60 or 90 days following the occurrence of the
permissible payment event, or (b) for payment during a specified period not longer than

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90 days following the occurrence of the permissible payment event under the condition
that if the specified period begins in one taxable year and ends in a second taxable
year, the payment will be made in the second taxable year. In addition, a plan may be
amended to provide for payment in accordance with clause (b) of the immediately
preceding sentence even though the plan was previously amended under § XI of this
notice to correct a plan provision that allowed the service provider to delay or accelerate
the timing of a payment as a result of the service provider’s action. In each case the
amendment may not otherwise change the time or form of payment.”
C. This § III.C modifies § VI.B of Notice 2010-6 by providing additional transition relief
through December 31, 2012 for plans that contain certain failures involving payments
dependent upon the service provider completing certain employment-related actions
(such as the execution and submission of a noncompetition agreement, a
nonsolicitation agreement, or a release of claims) as of December 31, 2010, provided
that any payments made after March 31, 2011 that could be paid during a period that
begins in one taxable year and ends in the subsequent taxable year are made during
the subsequent taxable year and provided further that to the extent any amounts remain
deferred under the plan, the plan is amended to be compliant by no later than
December 31, 2012. Accordingly, the following § VI.B.3 is added to § VI.B of Notice
2010-6:
“3. Transition Relief
For any plan with a provision eligible for correction under this section on or
before December 31, 2010, such provision will not be treated as failing to comply with
§ 409A(a) in form and a payment pursuant to such provision will not be treated as

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having failed to comply with § 409A(a) in operation with respect to an amount deferred
under the plan that is paid on or before March 31, 2011. For any plan provision eligible
for correction under this section as of December 31, 2010, with respect to an amount
deferred under the plan that is paid after March 31, 2011, such provision will not be
treated as failing to comply with § 409A(a) in form for taxable years commencing on or
after January 1, 2009, and payment pursuant to such provision will not be treated as
failing to comply with § 409A(a) in operation, provided that (a) any amounts paid under
the plan pursuant to such provision where the potential payment period begins in a
service provider taxable year and ends in a subsequent service provider taxable year
are paid in the subsequent taxable year, or if paid in the first taxable year are treated as
an operational failure and corrected in accordance with Notice 2008-113; and (b) if any
amounts that are subject to such a plan provision remain deferred after December 31,
2012 (other than any remaining installment, annuity or other payments of an amount
that has already become payable pursuant to such a plan provision), the plan provision
has been corrected in accordance with this section on or before December 31, 2012.
For purposes of this § VI.B.3, the failure to pay an amount during the subsequent
taxable year may be treated as an operational failure eligible for correction under Notice
2008-113 even though the plan provision under which the amount is paid fails to comply
with § 409A. For purposes of this paragraph, a plan includes a substantially similar
arrangement under which another service provider commences participation after
December 31, 2010 in accordance with the plan terms as of December 31, 2010.”
D. To provide an example of the additional method of correction available for certain
failures involving payments dependent upon the service provider completing certain

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employment-related actions (such as the execution and submission of a noncompetition
agreement, a nonsolicitation agreement, or a release of claims), the following examples
are added to § VI.C of Notice 2010-6:
“Example 5 (impermissible payment provision making timing of payment after a
permissible payment event dependent upon service provider action). The facts are the
same as in Example 4, except that on April 1, 2011, Employer and Employee N amend
Employee N’s employment agreement to provide for payment within 90 days following
Employee N’s separation from service, provided that Employee N has executed and
submitted a release of claims and the statutory period during which Employee N is
entitled to revoke the release of claims has expired prior to payment during the 90-day
period, and further provided that the payment would be made in the second taxable
year if the 90-day period began in one taxable year and ended in the subsequent
taxable year. Employee N has a separation from service with Employer on December
1, 2011. Employee N executes and submits a release of claims on December 15, 2011.
Employer pays Employee N $100x on January 1, 2012.
Conclusion
: Because Employer and Employee N corrected the plan before
Employee N’s separation from service, Employee N is not required to include any
amount in income under § 409A(a) solely due to the pre-correction plan provision.
Example 6 (transition relief - impermissible payment provision making timing of
payment after a permissible payment event dependent upon service provider action).
Employee SS is an employee of Employer whose employment agreement, entered into
on January 1, 2009, entitles Employee SS to $100x upon a separation from service
(defined to comply with § 1.409A-1(h)), paid in ten annual installments (that were not

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designated as separate payments for purposes of the application of § 409A)
commencing within 90 days following Employee SS’s separation from service, provided
that Employee SS executes and submits a release of claims and the period during
which Employee SS may revoke the release pursuant to applicable law has expired
within the 90 day period. Employee SS has a separation from service with Employer on
December 15, 2010. Employee SS executes and submits a release of claims on
December 20, 2010, and Employer commences the annual installments of $10X to
Employee SS on December 31, 2010.
Conclusion
: Because Employer paid Employee SS $10X in accordance with the
plan terms on or before March 31, 2011, Employee SS is not required to include any
amount in income under § 409A(a) solely due to the plan provision or the payment of
the $10X.
Example 7 (transition relief - impermissible payment provision making timing of
payment after a permissible payment event dependent upon service provider action).
The facts are the same as in Example 6, except that Employee SS’s separation from
service occurs on December 1, 2011, Employee SS executes and submits a release of
claims on December 20, 2011, and Employer commences the annual installments of
$10X to Employee SS on December 31, 2011. No amounts remain deferred under the
plan on December 31, 2011 except for the remaining installments on the amount
payable at separation from service.
Conclusion
: Provided that Employer and Employee SS treat the commencement
of payment in 2011 as an operational failure under Notice 2008-113, and such failure is
eligible to be corrected, and is actually corrected as an impermissible payment in

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accordance with Notice 2008-113, Employee SS is not required to include any amount
in income under § 409A(a) solely due to the plan provision. Note that had the payment
commenced in accordance with the terms of the plan but during 2012, Employer and
Employee SS would not have been required to treat the commencement of the payment
as an operational failure under Notice 2008-113, and Employee SS would not have
been required to include any amount in income under § 409A solely due to the plan
provision.
Example 8 (transition relief - impermissible payment provision making timing of
payment after a permissible payment event dependent upon service provider action).
Employee TT is an employee of Employer. Employer maintains a supplemental
executive retirement plan that is a nonaccount balance plan for purposes of § 409A and
that, as of December 31, 2010, provides for participation by every Level AA employee of
Employer. On April 1, 2011, Employee TT receives a promotion to a Level AA position
of employment, and accordingly becomes eligible for, and commences participation in,
Employer’s supplemental executive retirement plan. The plan provides for payment of a
participant’s benefit in a lump sum within 90 days following the participant’s separation
from service (defined to comply with § 1.409A-1(h)), provided that the participant
executes and submits a release of claims and the period during which the participant
may revoke the release pursuant to applicable law has expired within the 90 day period.
On December 1, 2012, Employer corrects the plan provision in accordance with § VI.B.2
of this notice. Employee TT continues in employment continuously through December
31, 2012.

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Conclusion: Because Employee TT became eligible to participate in accordance
with the terms of the supplemental executive retirement plan that were effective as of
December 31, 2010, Employee TT is eligible for the relief provided by § VI.B.3 of this
notice. Because Employer corrected the plan provision under § VI.B.2 of this notice
before December 31, 2012, the plan provision is not treated as having failed to comply
with § 409A(a) for periods on or before December 31, 2012.”
E. This § III.E modifies § XII.A of Notice 2010-6 to provide relief from the requirement
that a service recipient provide certain information to a service provider with respect to a
plan document correction made in accordance with the transition relief under § VI.B.3
and § XI of Notice 2010-6. (However, the requirement that a service recipient include
information with its own tax return relating to such a correction is not changed.) In
addition, the modifications of § XII.A of Notice 2010-6 in this § III.E provide relief from
the requirement that a service provider attach a statement to his or her return with
respect to a plan correction made in accordance with the transition relief in § VI.B 3 and
§ XI of Notice 2010-6. Accordingly, § XII.A of Notice 2010-6 is modified to read as
follows:
“A. Information and Reporting Required for Correction of a Document Failure

1. Service Recipient Requirements
A service recipient described in any of §§ V through XI of this notice must attach
to its timely-filed (including extensions) original federal income tax return for its taxable
year in which it corrects the failure, a statement entitled Ҥ 409A Document Correction
under § [INSERT APPROPRIATE SECTION(S)] of Notice 2010-6” setting out the
information required by § XII.B of this notice. This statement must also be attached to

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the service recipient’s timely-filed (including extensions) original federal income tax
return for the service recipient’s taxable year subsequent to the taxable year in which
the failure was corrected, but only to the extent that a service provider is required to
include an amount in income during such subsequent year to be eligible for the relief
under this notice. In addition, a service recipient described in any of §§ V through X of
this notice must provide to each such service provider who is affected by such failure a
statement entitled “§ 409A Document Correction under § [INSERT APPROPRIATE
SECTION(S)] of Notice 2010-6” setting out the information required by § XII.C of this
notice not later than the date (with extensions) on which it is required to provide an
information return (Form W-2 or 1099) to such service provider (or if no information
return is required for such service provider, not later than the January 31 following the
calendar year in which it corrects such failure) for the calendar year in which it corrects
such failure. The service recipient described in any of §§ V through X of this notice
must also provide the same information for the subsequent calendar year to the extent
the service provider is required to include an amount in income during such subsequent
year to be eligible for relief under this notice. In addition, any service recipient relying
on the relief provided in any of §§ V through XI of this notice must make reasonable
efforts to provide notice to the examining agent upon the commencement of an
examination of such service recipient’s federal tax return that the service recipient was
relying upon the relief provided under this notice for years covered by the examination.
A service recipient is not required to provide the information statements described in
this § XII.A.1 to affected service providers with respect to a plan that is eligible for, and
corrected under, § VI.B.3 or § XI of this notice, but the service recipient must attach the

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information statement described in this § XII.A.1 to its federal income tax return with
respect to such corrections.
2. Service Provider Requirements
A service provider who is relying on the relief provided in any of §§ V through X
of this notice for a failure to comply with § 409A(a) must attach to the service provider’s
timely filed (including extensions) original federal income tax return for the year in which
the failure was corrected the information required by § XII.D of this notice. A service
provider relying on the relief provided in any of §§ V through X of this notice for a failure
to comply with § 409A(a) must also attach the information required by § XII.D of this
notice to that service provider’s timely-filed (including extensions) original federal
income tax return for the year subsequent to the year in which the failure was corrected,
but only if the service provider is required to include an amount in income during that
year to be eligible for the relief in this notice. In addition, any service provider relying on
the relief provided in any of §§ V through X of this notice must make reasonable efforts
to provide notice to the examining agent upon the commencement of an examination of
such taxpayer’s federal tax return that the taxpayer was relying upon the relief provided
under this notice for years covered by the examination. A service provider is not subject
to the requirements of this paragraph XII.A.2 with respect to a plan that is eligible for,
and corrected under, § VI.B.3 or § XI of this notice.
3. Section References
For purposes of §§ XII.A.1 and XII.A.2, a section of this notice refers to each
separate section of this notice, such that §§ VI.A and VI.B are separate sections, and
for service recipients includes any use of the transition relief in § IV.B.3 or § XI.”

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F. To provide conforming relief with respect to the information to be provided to service
providers upon use of the transition relief in § IV.B.3 or § XI of Notice 2010-6, § XII.C of
Notice 2010-6 is modified to read as follows:
“C. Information to be Provided to Service Provider for Failures Described in any of §§ V
through X of this Notice not Eligible for Relief Under § VI.B. 3 or § XI of this Notice
The service recipient must provide the following information to each service provider
affected by a failure to comply with § 409A who is entitled to relief under any of §§ V
through X of this notice (but is not eligible for and corrected under the relief provided in
§ VI.B.3 or § XI of this notice) with respect to such failure:
(1) A statement that the service provider is entitled to the relief provided in §§ V
through X of this notice (identifying the applicable section of this notice under which the
document failure is corrected) with respect to a failure to comply with § 409A, and that
the service provider must attach a copy of the statement to the service provider’s
income tax return for the taxable year in which the failure was corrected and also to the
extent applicable, any subsequent taxable year in which an amount is included in
income under § 409A by the service provider as part of the correction.
(2) The information described in §§ XII.B.(1) through (4) of this notice, but only to the
extent that the information relates to a deferred amount of that service provider.”
G. To provide relief from the employee information reporting requirements upon use of
the transition relief in § VI.B.3 or § XI of Notice 2010-6, § XII.D of Notice 2010-6 is
modified to read as follows:
“D. Attachment to Service Provider Tax Return for Failures Described in any of §§ V
through X of this Notice not Eligible for Relief under § VI.B.3 or § XI of this Notice

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The service provider must attach to the service provider’s income tax return a
copy of the statement the service provider received from the service recipient with
respect to a failure described in any of §§ V through X of this notice that is not eligible
for and corrected under the relief provided in § VI.B.3 or § XI of this notice. If a service
provider has included an amount in income to be eligible for relief under this notice, and
that inclusion in income occurs in a year subsequent to the year the plan was corrected,
the service provider must include the statement with the return for the year of the
correction as well as the return for the year of income inclusion.”
H. To provide relief from the employee information reporting requirements upon the
correction of an operational failure in the same taxable year as the failure occurs,
§ IX.A of Notice 2008-113 is modified to read as follows:
”A. Information Required with Respect to Correction of an Operational Failure in the
Same Taxable Year as the Failure Occurs
A service recipient described in § IV of this notice must attach to its timely filed
(including extensions) original federal income tax return for its taxable year in which the
failure occurred a statement entitled “§ 409A Relief under IV of Notice 2008-113” stating
that it is relying upon § IV of this notice with respect to a correction of a failure to comply
with § 409A and setting out the following information with respect to each such failure:
1. The name and taxpayer identification number of each service provider
affected by the failure and whether such service provider is an insider with respect to
the service recipient. Where the same or a substantially similar operational failure has
occurred with respect to multiple service providers, the information required in § IX.A.2
through 5 may be supplied only once with respect to such operational failure, provided

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that the identification of each service provider affected by the operational failure in this
§ IX.A.1 references such information and the amount involved in the operational failure
with respect to such service provider.
2. Identification of the nonqualified deferred compensation plan with respect to
which such failure occurred.
3. A brief description of the failure and the circumstances under which it
occurred, including the amount involved and date on which the failure occurred.
4. A brief description of the steps taken to correct the failure and the date on
which such correction was completed.
5. A statement that the operational failure is eligible for the correction under the
terms of this notice, and that the service recipient has taken all actions required, and
otherwise met all requirements, for such correction.
In addition, each service recipient relying on the relief provided in § IV of this
notice must make reasonable efforts to provide notice to the examining agent upon the
commencement of an examination of the service recipient’s federal tax return that the
service recipient was relying upon the relief provided under this notice for years covered
by the examination.”
IV. EFFECTIVE DATE
Taxpayers may rely on this Notice 2010-80 for the modifications to Notice 2008-
113 for taxable years beginning on or after January 1, 2010. Taxpayers may rely on
this Notice 2010-80 for the modifications to Notice 2010-6 for taxable years beginning
on or after January 1, 2009.
V. EFFECT ON OTHER DOCUMENTS

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Notice 2008-113 and Notice 2010-6 are modified as provided in this notice.
Except as explicitly provided, this notice does not otherwise affect the guidance
provided in Notice 2010-6 and Notice 2008-113.
VI. DRAFTING INFORMATION
The principal author of this notice is Keith Ranta of the Office of Division
Counsel/Associate Chief Counsel (Tax Exempt and Government Entities), although
other Treasury and IRS officials participated in its development. For further information
on the provisions of this notice, contact Keith Ranta at (202) 927-9639 (not a toll-free
number).