n-07-100.pdf

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Part III – Administrative, Procedural, and Miscellaneous

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

Notice 2007-100

I. PURPOSE

This notice provides transition relief and guidance on the correction of certain
failures of a nonqualified deferred compensation plan to comply with § 409A(a) in
operation (an operational failure). This transition relief and additional guidance
includes:
• Methods for correcting certain operational failures during the taxable year of the
service provider in which the failure occurs to avoid income inclusion under
§ 409A(a).
• Transition relief limiting the amount includible in income under § 409A(a) for
certain operational failures occurring in a service provider’s taxable year
beginning before January 1, 2010, that involve only limited amounts.
• An outline of, and request for comments on, a potential corrections program that
would permit service recipients and service providers to limit the amounts
required to be included in income under § 409A(a) due to certain operational
failures.

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II. CORRECTIONS OF CERTAIN OPERATIONAL FAILURES IN THE SAME
TAXABLE YEAR AS THE FAILURE OCCURS

A. General Requirements

If an unintentional operational failure to comply with § 409A(a) occurs, but the
operational failure is corrected in accordance with this § II, no amount is required to be
included in income under § 409A(a) as a result of the failure. The relief provided by this
§ II applies only to unintentional operational failures, which means an unintentional
failure to comply with plan provisions that satisfy the requirements of § 409A(a) and the
guidance thereunder, or an unintentional failure to follow the requirements of § 409A(a)
in practice, due to one or more inadvertent errors in the operation of the plan. This § II
does not provide relief for plan terms and provisions that fail to meet the requirements of
§ 409A and the applicable guidance or for operational failures for which a correction is
not described in this § II.
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Relief is not available under this § II with respect to any
intentional failure to comply with the terms of a plan or the requirements of § 409A in the
operation of a plan. In addition, relief is not available under this § II with respect to any
exercise of a stock right that otherwise would result in a failure to comply with § 409A.
Relief otherwise available under this § II is conditioned upon the timely filing and
providing of the information required by § IV of this notice.
The relief provided under this § II is not available unless, in addition to correcting
the operational failure in accordance with this § II, the service recipient takes

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Reliance on the transition relief provided in Notice 2007-86, 2007-46 IRB 990, the
preamble to the final regulations under § 409A, 72 Fed. Reg. 19234, Notice 2006-79,
2006-43 IRB 763, the preamble to the proposed regulations under § 409A, 70 Fed. Reg.
57930, or Notice 2005-1, 2005-1 CB 274, for the years to which such transition relief
applies, does not preclude a taxpayer from qualifying for the relief provided in this notice
with respect to unintentional operational errors occurring in taxable years beginning
before January 1, 2009.

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commercially reasonable steps to avoid a recurrence of the operational failure. If the
same or a substantially similar operational failure has occurred previously, the relief is
not available for any taxable year of the service provider beginning after December 31,
2008, unless the service recipient demonstrates that the service recipient had
established practices and procedures reasonably designed to ensure that such an
operational failure would not recur, had taken commercially reasonable steps to avoid a
recurrence of the operational failure, and the operational failure occurred despite the
diligent efforts of the service recipient.
Relief is not available under this § II with respect to any intentional failure to
comply with the terms of a plan or the requirements of § 409A in the operation of a plan.
The relief provided in this section also is not available with respect to an operational
failure that is egregious, or where the failure is directly or indirectly related to
participation in an abusive tax avoidance transaction (meaning any listed transaction
under § 1.6011-4(b)(2)).
In each instance, the taxpayer claiming the relief has the burden of
demonstrating that the taxpayer was eligible for the relief and that the requirements of
this section have been met. Any application of the relief provided in this section is
subject to examination by the IRS.
B. Failure to Defer Amount or Incorrect Payment Corrected in the Same Taxable Year

This § II.B applies to amounts of nonqualified deferred compensation that, under
the terms of the plan and any applicable deferral election, and § 409A and the
applicable guidance, should not have been paid or made available to a service provider
in a taxable year of the service provider, but were paid or made available in that year

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due to an unintentional operational failure with respect to the plan, other than a payment
that fails to meet the requirements of § 409A(a)(2)(B)(i) and the applicable guidance
thereunder (requirement to delay for six months payments to a specified employee upon
separation from service). For rules relating to correction of certain payments made in
violation of § 409A(a)(2)(B)(i) and the applicable guidance under that section, see § II.C
of this notice.
An amount to which this § II.B applies is treated as having been timely deferred
in accordance with the terms of the plan and any applicable deferral election (or as
having continued to be deferred under the terms of the plan) if the service provider
repays to the service recipient the amount that was erroneously paid or made available
to the service provider on or before the last day of the service provider’s taxable year in
which such amount was erroneously paid or made available, and immediately after such
repayment the service provider has a legally binding right under the plan to be paid the
amount that would have been due if such amount had not been erroneously paid or
made available to the service provider during such taxable year, at the same time and in
the same form of payment that the amount would have been payable if such amount
had not been erroneously paid or made available to the service provider during such
taxable year.
In addition, if the total of all amounts to which this § II.B applies that are
erroneously paid or made available under a plan (as defined for purposes of § 409A) in
a service provider’s taxable year exceeds the limit on elective deferrals that would apply
to a qualified plan under § 402(g)(1)(B) for the year in which the erroneous payment
was made and the service provider is an insider (as defined in this § II.B) with respect to

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the service recipient, to qualify for the relief provided in this section, the service provider
must also pay interest to the service recipient at the time the service provider repays the
amount to the service recipient equal to the amount of the erroneous payment (E)
multiplied by the short-term applicable Federal rate (AFR) under § 1274(d)(1) (r)
multiplied by a fraction, the numerator of which is the number of days from the
erroneous payment date to the repayment date (n
1
) and the denominator of which is the
number of days in such taxable year (n
2
), or (E x r x n
1
/n
2
). For purposes of the
preceding sentence, r is the short-term AFR, based on annual compounding, for the
month in which the erroneous payment was paid or made available to the service
provider. For purposes of counting days under this § II.B, the first day of the period is
disregarded and the last day is taken into account. Where a repayment is made
through a reduction of the service provider’s other compensation, the repayment date
occurs on each date the compensation otherwise would have been paid to the service
provider, and if the amount withheld on a repayment date is less than the entire
erroneous payment, the interest calculation in the preceding sentence is applied by
substituting the unpaid balance immediately before the repayment for the amount of the
erroneous payment.
For purposes of this notice, a service provider is an insider with respect to a
service recipient if the service provider is a director or officer of the service recipient or
is directly or indirectly the beneficial owner of more than 10 percent of any class of any
equity security of the service recipient, determined in accordance with the rules of the
Securities and Exchange Commission under § 16 of the Securities Exchange Act of
1934, as amended, 15 USC 78p, without regard to whether the service recipient has

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any class of equity securities registered under § 12 of such Act, 15 USC 78l. See 17
CFR § 240.16a-1(a) (beneficial owner) and (f) (officer). In the case of a service
recipient that is not a corporation, such rules are applied by analogy.
The service provider may satisfy the requirement to repay the service recipient
the amount erroneously paid to the service provider and interest (if applicable) by
paying the service recipient the equivalent amount on or before the last day of such
taxable year. Alternatively, in lieu of such repayment, the service recipient may reduce
the service provider’s compensation that otherwise would have been paid during such
taxable year by an equivalent amount on or before the last day of such taxable year. In
either case, an amount will not be treated as paid by the service provider if, in
connection with such payment, the service recipient pays the service provider, or
otherwise provides a benefit (including an obligation to pay an amount or provide a
benefit in the future), intended as a substitute for all or part of the amount the service
provider is required to repay the service recipient.
The amount erroneously paid to the service provider that is repaid by the service
provider to the service recipient is not required to be included in income by the service
provider, or reported as income to the service provider on a Form W-2 or Form 1099 by
the service recipient. To the extent employment taxes have been withheld and paid
with respect to such payment, appropriate adjustments should be made under the
applicable rules under § 6413. To the extent that, in lieu of repayment, the service
recipient reduces other compensation that would have been paid to the service
provider, the other compensation that would have been paid to the service provider, but
instead is used to repay the erroneous payment or to pay any required interest on the

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erroneous payment, is includible in income (and wages if the service provider is an
employee); however, any employment taxes withheld and paid with respect to the
original erroneous payment may be applied to satisfy the requirement to withhold and
pay employment taxes on such compensation, in which case no adjustment to the
employment taxes previously withheld and paid should be made.
For purposes of this § II.B, the service provider’s account balance or other
amount of deferred compensation under the plan may be adjusted for earnings (or
losses) retroactive to the date the amount should have been credited to the service
provider’s account or otherwise deferred (or if the amount should have otherwise
remained deferred compensation after the end of the service provider’s taxable year,
retroactive to the date the amount was paid or made available), provided that such
adjustment must be made on or before the last day of such taxable year (or if it is
impracticable to make the adjustment by the end of such taxable year, the service
provider (in the case of earnings) and the service recipient (in the case of losses) must
have a legally binding right to have such adjustment made on or before the last day of
such taxable year).
The relief provided in this § II.B is not available with respect to any erroneous
payment occurring during any taxable year of the service provider in which the service
recipient experienced a substantial financial downturn or otherwise experienced
financial or other issues that indicated a significant risk that the service recipient would
not be able to pay the amount deferred when the payment became due.
In each of the following examples, it is assumed that Employer does not make
any payment to Employee, or otherwise provide a benefit (including an obligation to pay

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an amount or provide a benefit in the future) to or on behalf of Employee, that is
intended as a substitute for all or part of the amount that Employee pays to Employer
(or the reduction in compensation otherwise payable to Employee), that Employee is an
individual whose taxable year is the calendar year, that Employer did not experience a
substantial financial downturn or otherwise experience financial or other issues that
indicated a significant risk that the service recipient would not be able to pay the amount
deferred when the payment became due, and that Employee and Employer each satisfy
the other applicable requirements of this § II.
Example 1
: Employee, who is not an insider with respect to Employer, makes a
timely election to defer 50% of a bonus payable in 2007 pursuant to an account balance
plan maintained by Employer. The bonus is $100,000. Due to an unintentional
operational failure with respect to the plan, Employer defers only 10% of the bonus, or
$10,000, and pays Employee the other $90,000 in 2007 (including the $40,000 that
should have been deferred). The deferral is treated as made in accordance with the
terms of the plan and the deferral election if, on or before December 31, 2007, the
additional $40,000 is credited to Employee’s account balance and Employee pays
Employer $40,000. The $40,000 erroneously paid to Employee is not required to be
included in income by Employee or reported by Employer on Form W-2. Alternatively,
in lieu of the $40,000 repayment by Employee to Employer, compensation otherwise
payable to Employee in 2007 (such as salary payments) may be reduced by $40,000,
provided that the $40,000 reduction in Employee’s compensation used to repay the
amount (but not the $40,000 erroneous payment) is included in income by Employee
and reported as wages by Employer on the 2007 Form W-2. Employer may also adjust

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Employee’s account to reflect the earnings (or losses) that would have been allocated to
Employee’s account had the amount been timely deferred and credited to Employee’s
account balance, if such adjustment for earnings (or losses) is made on or before
December 31, 2007. Alternatively, if it is impracticable to make the adjustment on or
before December 31, 2007, such adjustment may be made later retroactively to
December 31, 2007, provided that Employee and Employer each has a legally binding
right on December 31, 2007 with respect to such adjustment. For example, if the
original incorrect deferral would have been credited with 10% in deemed investment
earnings, the deferral plus earnings would be $11,000. This amount must be increased
by the $40,000 repaid by Employee and may also be increased by an additional $4,000
($40,000 multiplied by 10%), to result in the $55,000 account balance that would have
been reflected had the amount been properly deferred. If the original incorrect deferral
would have been charged with 10% in deemed investment losses, the deferral less
losses would be $9,000. This account balance must be increased by the $40,000, but
may also be reduced by $4,000, for a net increase of $36,000, to result in the $45,000
account balance that would have been reflected had the amount been properly
deferred.
Example 2
: Pursuant to a nonqualified deferred compensation plan sponsored
by Employer, Employee, who is an insider with respect to Employer, is scheduled to
receive a $10,000 installment payment in 2007 that is not subject to the 6-month delay
for payments to specified employees upon separation from service under
§ 409A(a)(2)(B)(i). Due to an unintentional operational failure with respect to the plan,
Employer pays Employee $11,000. The installment payment is treated as made in

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accordance with the terms of the plan and the deferral election if on or before December
31, 2007, the excess $1,000 payment is credited to Employee’s account balance, and
Employee pays Employer $1,000. The $1,000 is not required to be included in income
by Employee or reported by Employer as wages on Form W-2. Alternatively, in lieu of
the $1,000 payment by Employee to Employer, Employee’s compensation otherwise
payable in 2007 (such as salary payments) may be reduced by $1,000, provided that
the $1,000 reduction in Employee’s compensation used to repay the amount (but not
the $1,000 erroneous payment) is included in income by Employee and reported by
Employer as wages on the 2007 Form W-2. Because the excess $1,000 payment does
not exceed the applicable limit on elective deferrals that would apply to a qualified plan
under § 402(g)(1)(B), Employee is not required to pay any interest to qualify for the
relief. Employer may also adjust Employee’s account to reflect the earnings (or losses)
that would have been allocated to Employee’s account had the amount been timely
deferred and credited to Employee’s account balance, if such adjustment for earnings
(or losses) is made on or before December 31, 2007. Alternatively, if it is impracticable
to make the adjustment on or before December 31, 2007, such adjustment may be
made later retroactively to December 31, 2007, provided that on December 31, 2007,
Employee and Employer each has a legally binding right with respect to such
adjustment.
Example 3
: Employee, who is an insider with respect to Employer, makes a
timely election to defer 80% of a $100,000 bonus payable on July 1, 2009, pursuant to
an account balance plan maintained by Employer. Due to an unintentional operational
failure with respect to the plan, Employer defers only 10% of the bonus, or $10,000, and

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pays Employee the other $90,000 (including $70,000 that should have been deferred)
on July 1, 2009. Assume for purposes of this example that the short-term AFR, based
on annual compounding, for July 2009 is 4.0 percent. Employer notifies Employee of
the error and Employee pays Employer $70,705.75 on October 1, 2009, consisting of
the $70,000 erroneous payment plus interest equal to $705.75 ($70,000 x .04 x 92/365)
(because the erroneous payment exceeds the limit on elective deferrals that would
apply to a qualified plan under § 402(g)(1)(B) for 2009 and Employee is an insider).
The deferral is treated as made in accordance with the terms of the plan under this §
II.B. The $70,000 is not required to be included in income by Employee or reported as
wages by Employer on Form W-2. Alternatively, in lieu of the $70,705.75 payment by
Employee to Employer, compensation otherwise payable to Employee in 2009 (such as
salary payments) may be reduced by $70,000 plus applicable interest, in which case the
reduction in Employee’s compensation used to repay the amount plus interest (but not
the erroneous $70,000 payment) must be reported by Employer as wages on the 2009
Form W-2 issued to Employee and included in Employee’s income for 2009. Employer
may also adjust Employee’s account to reflect the earnings that would have been
allocated to Employee’s account had the amount been timely deferred and credited to
Employee’s account balance, if such adjustment for earnings is made on or before
December 31, 2009. Alternatively, if it is impracticable to make the adjustment on or
before December 31, 2009, such adjustment may be made retroactively to December
31, 2009, provided that Employee and Employer each have a legally binding right on
December 31, 2009 with respect to such adjustment.

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C. Incorrect Payment in Violation of § 409A(a)(2)(B)(i) Corrected in the Same Taxable
Year

This section applies to amounts of nonqualified deferred compensation that,
under the terms of the plan and any applicable deferral election, and § 409A(a)(2)(B)(i)
(requirement to delay for six months payments to a specified employee upon separation
from service) and the applicable guidance, should not have been paid or made available
to a service provider for at least six months following the service provider’s separation
from service, but that were paid or made available to the service provider before the
expiration of such six-month period due to an unintentional operational failure with
respect to the plan. For the ability to correct certain other payments in violation of
§ 409A and the applicable guidance, see § II.B of this notice.
With respect to an amount to which this § II.C applies, the service provider will
not be treated as having failed to comply with § 409A(a)(2)(B)(i) and the terms of the
plan and any applicable deferral election as a result of the amount being paid or made
available at the earlier date if, on or before the last day of the service provider’s taxable
year in which the amount was paid or made available, the service provider repays to the
service recipient the amount that was erroneously paid or made available to the service
provider, immediately after such repayment the service provider has a legally binding
right to receive such amount from the service recipient on the date that is the same
number of days after the later of (i) the date the amount would otherwise have been
payable under the terms of the plan and the applicable deferral election or (ii) the date
of the repayment as the number of days from the date the service recipient made the
erroneous payment to the service provider through the date the service provider repaid
the erroneous payment to the service recipient, and the repaid amount is not paid or

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made available to the service provider before such date. For purposes of counting days
under this § II.C, the first day of the period is disregarded and the last day is taken into
account (for example, if on June 1, 2008, a service recipient mistakenly paid a service
provider an amount that the service provider repaid on June 30, 2008, there would be
29 days from the date of payment through the date of repayment).
If the requirements of this § II.C are met, the original payment from the service
recipient to the service provider that has been repaid to the service recipient is not
required to be reported as income on Form W-2 or Form 1099, as applicable. To the
extent employment taxes have been withheld and paid with respect to such payment,
appropriate adjustments should be made under the applicable rules under § 6413.
However, the subsequent payment of the amount by the service recipient to the service
provider is required to be reported appropriately as income on Form W-2 or Form 1099,
as applicable, and subject to the applicable employment taxes. If the payment is
deductible by the service recipient, the taxable year in which such deduction is
allowable will be determined in accordance with § 404(a)(5) and the service recipient’s
method of accounting.
The relief provided in this section is not available with respect to any erroneous
payment occurring during any taxable year of the service provider in which the service
recipient experienced a substantial financial downturn or otherwise experienced
financial or other issues that indicated a significant risk that the service recipient would
not be able to pay the amount deferred when the payment became due.
In each of the following examples, it is assumed that: Specified Employee is an
individual whose taxable year is the calendar year; at all relevant times Specified

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Employee is a specified employee of Employer for purposes of § 409A(a)(2)(B)(i); at all
relevant times Employer is not experiencing any substantial financial downturn or any
other financial or other issue that indicates a significant risk that Employer would not be
able to pay the relevant deferred amounts when due; and Employee and Employer each
satisfy the other applicable requirements of this § II.
Example 1
: Under a nonqualified deferred compensation plan sponsored by
Employer, Specified Employee has a legally binding right to a payment of deferred
compensation on the first day of the seventh month following Specified Employee’s
separation from service. Specified Employee separates from service on November 15,
2007 so that the payment is due on June 1, 2008. Due to an unintentional operational
failure with respect to the plan, Employer pays Specified Employee the amount of
deferred compensation on May 1, 2008. Employer discovers the error on July 1, 2008,
and Specified Employee repays the amount to Employer on July 1, 2008 (61 days after
the erroneous payment). Provided that immediately after such repayment Specified
Employee has a legally binding right to receive the amount from Employer on August
31, 2008 (61 days after the July 1, 2008 repayment date) and Employer does not repay
the amount to Specified Employee before that date, Specified Employee will not be
treated as having failed to comply with § 409A(a)(2)(B)(i) and the terms of the plan and
the applicable deferral election solely as a result of the early payment.
Example 2
: Under a nonqualified deferred compensation plan sponsored by
Employer, Specified Employee has a legally binding right to a payment of deferred
compensation payable on the first day of the seventh month following separation from
service. Specified Employee separates from service on May 1, 2008 so that the

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payment is due on December 1, 2008. Due to an unintentional operational failure with
respect to the plan, Employer pays Specified Employee the amount of deferred
compensation on May 1, 2008. Employer discovers the error and Specified Employee
repays the amount to Employer on July 1, 2008 (61 days after the erroneous payment).
Provided that immediately after such repayment Specified Employee has a legally
binding right to receive the amount from Employer on January 31, 2009 (61 days after
December 1, 2008) and Employer does not repay the amount to Specified Employee
before that date, Specified Employee will not be treated as having failed to comply with
§ 409A(a)(2)(B)(i) and the terms of the plan and the applicable deferral election solely
as a result of the early payment. The erroneous payment is not includible in Specified
Employee’s income, and is not required to be reported on the 2008 Form W-2. Such
amount is includible in Specified Employee’s income in the year in which the amount is
repaid by Employer to Specified Employee pursuant to the plan, and is required to be
reported on that year’s Form W-2 and subject to applicable employment taxes.
D. Excess Deferred Amount Corrected in the Same Taxable Year

If under the terms of a plan and an applicable deferral election, and § 409A and
the applicable guidance, an amount that should not have been deferred compensation
under the plan is credited to the service provider’s account or otherwise treated as
deferred compensation under the plan as a result of an unintentional operational failure
with respect to the plan, and such excess amount otherwise would have been paid to
the service provider during the service provider’s taxable year in which the excess
amount was incorrectly credited to the service provider’s account or otherwise treated
as deferred compensation under the plan, the excess amount is not treated as an

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amount deferred under the plan if the excess amount is paid to the service provider on
or before the last day of the service provider’s taxable year in which the excess amount
was incorrectly treated as deferred compensation. The amount to which the service
provider has a legally binding right under the plan at the end of the year must be
adjusted to reflect the payment (for example, through a reduction in the account
balance). In addition, if the service provider is an insider with respect to the service
recipient (as defined in § II.B of this notice), the remaining account balance (or other
deferred compensation under the plan) must be adjusted for positive earnings
retroactive to the date the excess amount was incorrectly credited to the service
provider’s account or otherwise incorrectly treated as deferred under the plan, provided
that such adjustment must be made on or before the last day of the service provider’s
taxable year in which such amount was incorrectly treated as deferred compensation
under the plan (or if it is impracticable to make the adjustment by the end of such year,
the service recipient must have a legally binding right on the last day of such taxable
year to make such adjustment retroactively to such date). In other cases, such
adjustment may be (but is not required to be) made. Where the amount was subject to
losses, the remaining account balance (or other deferred compensation under the plan)
is not required to be adjusted, but may be adjusted for such losses retroactive to the
date the excess amount was incorrectly credited to the service provider’s account or
otherwise incorrectly treated as deferred under the plan, provided that such adjustment
must be made on or before the last day of the service provider’s taxable year in which
such amount was incorrectly treated as deferred compensation under the plan (or if it is
impracticable to make the adjustment by the end of such taxable year, the service

17
provider must have a legally binding right on the last day of such taxable year to require
that such an adjustment be made retroactively to the date of the failure). The service
recipient may (but is not required to) pay reasonable interest to (or otherwise
reasonably compensate) the service provider to reflect the time value of money with
respect to the late payment, provided that such interest or other compensation is paid or
made available by the end of the service provider’s taxable year in which such amount
was incorrectly treated as deferred compensation under the plan.
This relief is not applicable to a service recipient’s failure to timely pay in the
proper taxable year of a service provider amounts that were deferred in one or more
previous taxable years of the service provider. However, see § 1.409A-3(d) for certain
circumstances under which such payments may be treated as made in accordance with
a designated payment date.
Example
: Employee, who is an insider with respect to Employer and whose
taxable year is the calendar year, makes a timely election pursuant to an account
balance plan to defer 10% of a bonus otherwise payable in 2007. The bonus is
$100,000. Due to an unintentional operational failure with respect to the plan, Employer
defers 50% of the bonus, or $50,000, and pays Employee $50,000 (instead of deferring
$10,000 and paying Employee $90,000). The excess $40,000 will not be treated as
deferred under the plan if on or before December 31, 2007, Employer pays Employee
$40,000 of the account balance under the plan, and Employee and Employer each
satisfy the other applicable requirements of this § II. The remaining account balance
must be adjusted for earnings and may be adjusted for losses that were allocable to
such amount under the plan. For example, if the account was credited with 10% in

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deemed investment earnings, the account balance must be reduced by both the
$40,000 paid to Employee and the $4,000 in earnings, or $44,000, to result in the
$11,000 account balance that would have been reflected had the deferred
compensation under the plan been properly deferred. The adjustment must be made by
December 31, 2007, except that the adjustment can be made later, retroactively as of
that date, if it is impracticable to make the adjustment by December 31, 2007 and the
service recipient has a legally binding right on that date to make such a retroactive
adjustment. If the account was charged with 10% in deemed investment losses, the
account balance must be reduced by the $40,000, but may be increased not later than
December 31, 2007, by the $4,000 in losses on the improperly deferred amount, for a
net reduction of $36,000, to result in the $9,000 account balance that would have been
reflected had the deferred compensation under the plan been properly deferred.
Alternatively, if it is impracticable to make the adjustment on or before December 31,
2007, such $4,000 adjustment may be made later retroactively to December 31, 2007,
provided that the service provider has a legally binding right on December 31, 2007, to
have such adjustment made. Employer may (but is not required to) pay Employee
reasonable interest on the $40,000 erroneous deferral provided such payment is made
by December 31, 2007.
E. Correction of Exercise Price of Otherwise Excluded Stock Rights

This § II.E applies if under the terms of a stock right, the stock right would not be
nonqualified deferred compensation under § 1.409A-1(b)(5)(i)(A) (excluded stock
options) or § 1.409A-1(b)(5)(i)(B) (excluded stock appreciation rights), except that the
exercise price of the stock right is less than the fair market value of the underlying stock

19
on the date of grant. This section applies only if the failure of the exercise price to equal
or exceed the fair market value of the underlying stock results from an unintentional
administrative error in determining the exercise price. If this section applies to a stock
right, the stock right is treated from the date of grant as not providing for nonqualified
deferred compensation for purposes of § 409A. This section applies if before the stock
right is exercised and not later than the last day of a service provider’s taxable year in
which the service recipient granted the service provider the stock right, the exercise
price is reset to an amount equal to or exceeding the fair market value of the underlying
stock on the date of grant, and at all times before such increase in the exercise price the
stock right otherwise would not have provided for nonqualified deferred compensation
for purposes of § 409A. For example, assume that on January 1, 2008, an employer
grants an employee a stock option to purchase 100 shares of stock, and the stock
option would otherwise be excluded from coverage under § 409A except that due to an
unintentional administrative error the exercise price is set at an amount below the fair
market value of the stock on January 1, 2008. Assume further that on July 1, 2008, the
employee partially exercises the stock option and purchases 40 shares, but retains a
stock option to purchase 60 shares. Provided that on or before December 31, 2008, the
exercise price of the remaining stock option to purchase 60 shares is reset to a price at
or above the fair market value of the underlying stock on January 1, 2008, the stock
option to purchase 60 shares may qualify for the relief provided in this section. Because
the exercise price was not reset before July 1, 2008, the portion of the stock option that
was exercised to purchase 40 shares is not eligible for the relief provided in this section.

20
III. TRANSITION RELIEF FOR CERTAIN OPERATIONAL FAILURES INVOLVING
LIMITED AMOUNTS OCCURRING DURING TAXABLE YEARS BEGINNING
BEFORE 2010

A. General Requirements

If an unintentional operational failure to comply with § 409A(a) occurs during a
service provider’s taxable year beginning before January 1, 2010, but the operational
failure qualifies for the relief provided in this § III and is corrected in accordance with this
§ III, the amount required to be included in income under § 409A(a) as a result of the
failure, and the resulting additional taxes under § 409A, are limited in accordance with
the provisions of this section. In each instance, the taxpayer claiming the relief (the
service provider, the service recipient, or both) has the burden of demonstrating that
such taxpayer was eligible for the relief and that the requirements of this section have
been met. Any application of the relief provided in this section is subject to examination
by the IRS.
The relief provided by this section applies only to unintentional operational
failures, which means an unintentional failure to comply with plan provisions that satisfy
the requirements of § 409A(a) and the guidance thereunder, or an unintentional failure
to follow the requirements of § 409A in practice, due to one or more inadvertent errors
in the operation of the plan. This notice does not apply to plan terms that fail to meet
the requirements of § 409A and applicable guidance or to operational failures for which
a correction is not provided in this § III.
The relief provided under this § III is not available unless, in addition to correcting
the operational failure in accordance with this § III, the service recipient takes
commercially reasonable steps to avoid a recurrence of the operational failure. For any

21
taxable year of the service provider beginning after December 31, 2008, if the same or a
substantially similar operational failure has occurred previously, the service recipient
must demonstrate that the service recipient had established practices and procedures
reasonably designed to ensure that such an operational failure would not recur, had
taken commercially reasonable steps to avoid a recurrence of the operational failure
and that the operational failure occurred despite the diligent efforts of the service
recipient. Relief otherwise available under this § III is conditioned upon the timely filing
and providing of the information required by § IV of this notice.
The relief provided by this section is not available with respect to any failure
unless all of the requirements of this section (other than the requirements of § IV of this
notice) have been satisfied not later than the end of the second taxable year of the
service provider following the taxable year of the service provider in which such failure
occurred. In addition, the relief provided in this section is not available if a federal
income tax return of the service provider for the taxable year of the service provider in
which the failure occurred is under examination with respect to the plan. For this
purpose, an individual service provider is treated as under examination with respect to
the plan if the individual is under examination with respect to the individual’s federal
income tax return (for example, Form 1040) for the taxable year.
Relief is not available under this § III with respect to any intentional failure to
comply with the terms of a plan or the requirements of § 409A in the operation of a plan.
The relief provided in this section also is not available with respect to an operational
failure that is egregious, or where the failure is directly or indirectly related to
participation in an abusive tax avoidance transaction (meaning any listed transaction

22
under § 1.6011-4(b)(2)). The relief provided in this section also is not available with
respect to a failure to comply with § 409A resulting from an exercise of a stock right.
B. Failure to Defer Limited Amount not Corrected in the Same Taxable Year and
Certain Erroneous Payments

This § III.B applies if during a service provider’s taxable year beginning before
January 1, 2010, an unintentional operational failure occurs that meets the following
requirements:
(1) An amount should have been treated as deferred compensation under the
terms of the plan and any applicable deferral election, and § 409A and the applicable
guidance, but the amount was not credited to the service provider’s account or
otherwise treated as deferred compensation during the service provider’s taxable year,
or did not remain deferred compensation after the end of such year;
(2) Because the amount was not credited to the service provider’s account or
otherwise treated as deferred compensation under the plan during such year, or did not
remain deferred compensation under the plan after the end of such year, the amount
was paid or made available to the service provider during the service provider’s taxable
year;
(3) Section II.B of this notice does not apply because relief is not available under
§ II.B of this notice with respect to the failure, the failure is not corrected under § II.B of
this notice, or otherwise; and
(4) The amount paid or made available to the service provider does not exceed
the limit on elective deferrals that would apply to a qualified plan under § 402(g)(1)(B)
for the year of the operational failure.

23
In such a case, if the plan is otherwise compliant with the requirements of § 409A
and the applicable guidance, the amount includible in income under § 409A(a) as a
result of such payment is limited to the amount that should have been treated as
deferred compensation under the plan (or should have continued to be deferred
compensation under the plan) but was instead paid or made available to the service
provider, and does not include any other amounts deferred under the plan. In addition,
with respect to such amount includible in income under § 409A(a), the service provider
is required to pay the additional tax under § 409A(a)(1)(B)(i)(II) (the additional 20% tax),
but is not required to pay the additional tax under § 409A(a)(1)(B)(i)(I) (the premium
interest tax).
For purposes of this section, a payment of an amount (including a payment of an
amount that is one of a series of installment payments or life annuity payments) that
under the terms of the plan and § 409A(a)(2)(B)(i) and the applicable guidance is
required to be delayed for at least six months following a separation from service, but is
paid before the completion of that six months, may be treated as the payment of an
amount that should have continued to be deferred compensation. In addition, for
purposes of this section, the plan includes any arrangements treated as a single plan
under § 1.409A-1(c), so that this section will apply only if any and all erroneous
payments under the plan, in the aggregate, of amounts that otherwise should have been
treated as deferred compensation with respect to the service provider during the taxable
year (or should have continued to be deferred compensation during the taxable year),
do not exceed the limit on elective deferrals that would apply to a qualified plan under
§ 402(g)(1)(B) for such year. The relief provided in this § III.B is not available if the

24
operational failure occurred during a taxable year of the service provider in which the
service recipient experienced a substantial financial downturn or otherwise experienced
financial or other issues that indicated a significant risk that the service recipient would
not be able to pay the amount deferred when the payment became due.
It is assumed for purposes of the following examples that: Employee is an
individual whose taxable year is the calendar year; Employee’s tax return is not under
examination for any relevant period; during all relevant periods Employer did not
experience any financial downturn or financial or other issues indicating a significant risk
that Employer would not be able to pay relevant deferred amounts when due; and
Employee and Employer each satisfy the other applicable requirements of this § III.
Example 1
: Employee makes a timely election to defer 10% of a bonus payable
in 2007 pursuant to an account balance plan. The bonus is $10,000. Due to an
unintentional operational failure with respect to the plan, Employer defers only 8% of the
bonus, or $800, and pays Employee $9,200 (instead of deferring $1,000 and paying
Employee $9,000). The amount is not corrected by December 31, 2007, when
Employee’s account balance is $100,000. As a payment to Employee, Employer must
treat the amount as a wage payment for employment tax and reporting purposes, as
appropriate, including reporting as income and wages on the 2007 Form W-2.
Employer is permitted to report as income under § 409A on the 2007 Form W-2 (or
2007 Form W-2c), Box 12, using Code Z, only $200, and Employee is permitted to
include in income under § 409A for 2007 only $200. Furthermore, Employee is
permitted to pay the additional 20% tax only with respect to the $200 (or $40 in
additional income tax), and is not required to pay the premium interest tax.

25
Example 2: Employee is a specified employee entitled under a nonqualified
deferred compensation plan to a life annuity commencing upon the first day of the
seventh month following the specified employee’s separation from service. The annuity
payments are $2,000 per month. Employee separates from service on April 18, 2007,
and is scheduled to receive an initial annuity payment on November 1, 2007. Due to an
inadvertent miscalculation of the specified employee’s separation from service date,
Employee receives a $2,000 payment on October 1, 2007, before the end of the 6-
month period following Employee’s separation from service. Employer and Employee
do not discover the error until 2008, so that the relief provided in § II.C of this notice is
not available. As a payment to Employee, Employer must treat the amount as a wage
payment for employment tax and reporting purposes, as appropriate, including reporting
as income on the 2007 Form W-2. Employer is permitted to report as income under
§ 409A on the 2007 Form W-2 (or 2007 Form W-2c), Box 12, using Code Z, only
$2,000, and Employee is permitted to include in income under § 409A in 2007 only
$2,000. Furthermore, Employee is permitted to pay the additional 20% tax only with
respect to the $2,000 (or $400 in additional income tax), and is not required to pay the
premium interest tax.
C. Limited Excess Deferred Amount not Corrected in the Same Taxable Year

This § III.C applies if on or before the last day of a service provider’s taxable year
beginning before January 1, 2010, the following requirements are met:
(1) Under the terms of the plan and any applicable deferral election, and § 409A
and the applicable guidance, an amount of deferred compensation under the plan
should have been paid or made available to the service provider during the service

26
provider’s taxable year, or an amount is treated as deferred compensation under the
plan that should have been paid or made available to the service provider during the
service provider’s taxable year, but such amount is not paid or made available due to an
unintentional operational failure with respect to the plan;
(2) Section II.D of this notice does not apply because relief is not available under
§ II.D of this notice with respect to the failure, the failure is not corrected under § II.D of
this notice, or otherwise;
(3) The amount that should have been paid or made available to the service
provider during that service provider’s taxable year does not exceed the limit on elective
deferrals that would apply to a qualified plan under § 402(g)(1)(B) for such year;
(4) By the later of the end of the service provider’s taxable year in which the
failure is discovered or the fifteenth day of the third month following the date upon which
the failure is discovered, the service recipient pays the service provider the amount that
should have been paid or made available to the service provider, provided that any
earnings allocable to such amounts through the date of the payment are either forfeited
or added to the payment to the service provider, and any losses allocable to such
amounts through the date of the payment are either permanently disregarded or
subtracted from the payment to the service provider, and the service recipient reports
such payment on a Form W-2 or Form 1099, as applicable, in accordance with the
requirements of this section; and
(5) The service provider includes such amount in income and pays the additional
taxes under § 409A(a) as described in this section on a timely filed federal income tax

27
return (including an income tax return filed in accordance with a timely request for
extension, but not including an amended income tax return).
In such a case, if the plan otherwise complies with the requirements of § 409A
and the applicable guidance, the amount includible in income under § 409A(a) as a
result of such failure is limited to the excess amount paid to the service provider, and
does not include any other deferred compensation under the plan, and the amount is
includible in income only when paid to the service provider in accordance with this
section. In addition, with respect to this amount includible in income under § 409A(a),
the service provider is required to pay the additional 20% tax, but is not required to pay
the premium interest tax. If the service recipient properly reports the payment as
includible in income under § 409A on a Form W-2, if applicable, for the year in which the
payment was made, including reporting such amount on Form W-2, Box 12 using Code
Z, the service recipient will not be subject to penalties or liability for the failure to
properly withhold under § 3402.
For purposes of this section, the plan includes any arrangements treated as a
single plan under § 1.409A-1(c), so that this section will apply only if any and all
erroneous deferrals under the plan, in the aggregate, of amounts that otherwise should
have been paid during the service provider’s taxable year to the service provider do not
exceed the applicable limit on elective deferrals that would apply to a qualified plan
under § 402(g)(1)(B).
Example
: Employee, who has a calendar year taxable year, makes a timely
election to defer 8% of a bonus payable in 2007 into an account balance plan. The
bonus is $10,000. Due to an unintentional operational failure with respect to the plan,

28
Employer defers 10% of the bonus, or $1,000, and pays Employee $9,000 (instead of
deferring $800 and paying Employee $9,200). The plan otherwise complies with
§ 409A and the applicable guidance. Employer discovers the error on February 1,
2008, so that the excess deferred amount of $200 is not corrected by December 31,
2007. On March 1, 2008, at which time Employee’s account balance includes $15 in
earnings on the excess $200 credited to the account, Employer pays Employee $215.
Employer reports the $215 as income under § 409A on the 2008 Form W-2, Box 1 and
Box 12, using Code Z and satisfies the other applicable requirements of this § III,
including the requirements of § IV of this notice. Provided that Employee reports such
income and pays the applicable taxes, including the additional § 409A taxes, on a timely
filed 2008 Form 1040 (including a 2008 Form 1040 filed under extension, but not an
amended 2008 Form 1040), and satisfies the applicable requirements of § IV of this
notice, Employee is not required to include any additional amounts deferred under the
plan in income under § 409A(a) or to include any amount in income under § 409A for
years before 2008, and with respect to the $215 includible in income under § 409A is
required to pay only the additional 20% tax (or $42.50 in additional income tax), and not
the premium interest tax. Employer may also have paid Employee only the $200
excess deferred amount if the $15 in earnings on such amount were forfeited.
IV. INFORMATION AND REPORTING REQUIREMENTS
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 § II 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 § II of Notice 2007-100”

29
setting out the information required by § IV.A.1 of this notice, and must provide to each
service provider affected by such failure a statement entitled “§ 409A Relief under § II of
Notice 2007-100” setting out the information required by § IV.A.2 of this notice by no
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 for the calendar year in which such
failure occurred (or if no information return is required for such service provider, not later
than the January 31 following the calendar year in which such failure occurred).
Notwithstanding the foregoing, to qualify for the relief described in § II.E of this notice
(Correction of Exercise Price of Otherwise Excluded Stock Rights), the service recipient
is not required to provide a statement to such service provider with respect to such
failure. In addition, each taxpayer relying on the relief provided in § II of this notice must
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 (except in the case of a service
provider for whom a correction has been made under § II.E of this notice).
1. Attachment to Service Recipient Tax Return for Failures Described in § II

The service recipient must attach a statement to its federal income tax return stating
that it is relying upon § II 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:
a. 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 § IV.A.1.b through

30
e of this notice may be supplied only once with respect to such operational failure,
provided that the identification of each service provider affected by the operational
failure in this § IV.A.1.a references such information and the amount involved in the
operational failure with respect to such service provider.
b. Identification of the nonqualified deferred compensation plan with respect to
which such failure occurred.
c. A brief description of the failure and the circumstances under which it occurred,
including the amount involved and date on which the failure occurred.
d. A brief description of the steps taken to correct the failure and the date on which
such correction was completed.
e. 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.
2. Information to be Provided to Service Provider for Failures Described in § II

The service recipient must provide the following information to each service provider
affected by correction of a failure to comply with § 409A who is entitled to relief under
§ II of this notice (other than § II.E of this notice (Correction of Exercise Price of
Otherwise Excluded Stock Rights)) with respect to such failure:
a. A statement that the service provider is entitled to the relief provided in § II of this
notice with respect to a failure to comply with § 409A.
b. The information described in § IV.A.1.b through e of this notice.

31
B. Information Required with Respect to Transition Relief for Certain Operational
Failures Involving Limited Amounts
A service recipient described in § III.B or III.C of this notice must attach to its
timely-filed (including extensions) original federal income tax return for its taxable year
in which it discovers the failure a statement entitled “§ 409A Relief under § III of Notice
2007-100” setting out the information required by § IV.B.1 of this notice and, not later
than the date (with extensions) on which it is required to provide an information return
(Form W-2 or 1099) for the calendar year in which it discovers such failure to a service
provider who is affected by such failure (or if no information return is required for such
service provider, not later than the January 31 following the calendar year in which it
discovers such failure), must provide to each such service provider a statement entitled
“§ 409A Relief under § III of Notice 2007-100” setting out the information required by
§ IV.B.2 of this notice. A service provider who is relying on the relief provided in § III.B
or III.C of this notice with respect to a failure to comply with § 409A must attach to the
service provider’s timely-filed (including extensions) original federal income tax return
for the year in which such failure was discovered the information required by § IV.B.3 of
this notice. In addition, each taxpayer relying on the relief provided in § III of this notice
must 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.
1. Attachment to Service Recipient Tax Return for Failures Described in § III.B or III.C.

The service recipient must attach a statement to its return setting out the following
information with respect to each failure described in § III.B. or III.C of this notice:

32
a. The name and taxpayer identification number of each service provider affected
by the failure. Where the same or a substantially similar operational failure has
occurred with respect to multiple service providers, the information required in
§ IV.B.1.b through e of this notice may be supplied only once with respect to such
operational failure, provided that the identification of each service provider affected by
the operational failure in this § IV.B.1.a references such information and the amount
involved in the operational failure with respect to such service provider.
b. Identification of the nonqualified deferred compensation plan with respect to
which such failure occurred.
c. A brief description of the failure and the circumstances under which it occurred,
including the amount involved and date on which the failure occurred.
d. A brief description of the steps taken by the service recipient to avoid a
recurrence of the failure, including the date on which such steps were implemented.
e. 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.
2. Information to be Provided to Service Provider for Failures Described in § III.B or
III.C.
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 § III.B or III.C
of this notice with respect to such failure:
a. A statement that the service provider is entitled to the relief provided in § III.B or
III.C of this notice (as applicable) with respect to a failure to comply with § 409A and

33
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 discovered.
b. The information described in § IV.B.1.b through e of this notice.
3. Attachment to Service Provider Tax Return for Failures Described in § III.B or III.C.

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
each such failure.
V. POTENTIAL PROGRAM TO CORRECT CERTAIN FAILURES TO COMPLY WITH
§ 409A(a) IN OPERATION

The Treasury Department and the IRS are considering establishing a corrections
program under which taxpayers could correct certain failures to comply with § 409A(a)
in the operation of a nonqualified deferred compensation plan (operational failures),
including correction after the end of the service provider’s taxable year in which an
operational failure occurs. The Treasury Department and the IRS request comments on
all aspects of this potential program. For information regarding the submission of
comments, see § VI of this notice.
The program under consideration would cover failures that are not eligible for the
transition relief provided in § III of this notice because the amount involved is too large.
The program may also provide that the relief in § III for failures involving small amounts
would be available permanently. In addition, it is expected that the program under
consideration would, in general, permit a service provider with respect to whom an
operational failure occurred that is addressed by the program but not eligible for the
relief provided in § III of this notice, to include an amount in income, and pay the
additional taxes under § 409A with respect to, only the amount involved in the

34
operational failure, and not other amounts deferred under the plan. For example, if a
service provider erroneously deferred an additional $50,000 to a plan under which the
service provider had previously deferred $1,000,000 (for a total of $1,050,000), and the
$50,000 deferral and the error were corrected pursuant to the program, the service
provider would not be required to include in income under § 409A, and pay the
additional § 409A taxes with respect to, the $1,000,000 deferred under the plan that
was not involved in the operational failure.
The Treasury Department and the IRS anticipate that the IRS would not issue a
ruling, enter into a closing agreement or otherwise issue any formal approval evidencing
that participating taxpayers had met the requirements of, and qualified for the relief
available under, the program. Rather, if the IRS examined the relevant tax returns, the
service recipient and service provider would have the burden of demonstrating that the
applicable requirements had been met. The corrections program would be restricted to
service providers that at the time of the correction are not under examination for the
year or years in which the operational failure occurred, and would be limited to
operational failures that are corrected promptly after discovery and in any case within
two years after the occurrence. As part of the corrections program, the service recipient
and the service provider would be required to satisfy information and reporting
requirements substantially similar to those set forth in § IV.B of this notice and the
service recipient and service provider would also be required to provide notice to the
examining agent upon the commencement of an examination that the taxpayer was
relying upon the relief provided under the program for years covered by the
examination.

35
The Treasury Department and the IRS anticipate that the program would include
the following limitations and requirements:
• Relief would only be available with respect to an operational failure that has
occurred notwithstanding the service recipient’s reasonable efforts to comply with
the terms of the plan. Thus relief would only be available if the service recipient
had established practices and procedures reasonably designed to ensure
compliance with § 409A.
• Relief would only be available with respect to an operational failure if the service
recipient also took commercially reasonable steps to avoid a recurrence of the
same type of operational failure.
• Relief would also not be available to correct an operational failure that is
egregious, intentional, or where the failure is directly or indirectly related to
participation in an abusive tax avoidance transaction (meaning any listed
transaction under §1.6011-4(b)(2)).
• If the operational failure involved an accelerated payment that did not otherwise
satisfy the plan’s terms and the requirements of § 409A(a), the correction of the
failure would require that the service provider return to the service recipient the
amount improperly paid by the service provider to the service recipient. The
service provider would not be entitled to any loss or deduction for either the year
of the repayment or the year to which the correction applied. However, if the
plan does not otherwise violate the provisions of § 409A and the applicable
guidance, the service provider would be required thereafter to include in gross
income only additional amounts subsequently paid from such plan (as if the

36
amount taken into gross income in the year of the failure resulted in investment in
the contract with respect to the amount that was actually included in gross
income for the year of the erroneous payment).
• Relief would not be available for an accelerated payment that did not otherwise
satisfy the terms of the plan and the requirements of § 409A(a) if the service
recipient made the payment proximate to a financial downturn of the service
recipient or the service recipient experiencing any financial or other issue that
indicated a significant risk that the service recipient would not be able to pay the
amount deferred when the payment became due under the plan.
• If the operational failure involved an amount that was improperly deferred (for
example, the deferral of salary in excess of the applicable deferral election under
the terms of the plan), or an amount of deferred compensation that was not paid
to the service provider on the date applicable under the terms of the plan, the
correction of the operational failure would require that the service recipient pay
the amount to the service provider. The service provider would be required to
include the amount in gross income in the service provider’s taxable year in
which the failure occurred and not at the time the service recipient made the
corrective payment, with the service provider being required to report the amount
on an original or amended return for such year and pay the appropriate tax
thereon.
• Investment earnings (potentially including losses) in accordance with the terms of
the plan for the period of time after the operational failure through the date of
correction would be required to be taken into account.

37
• In addition to the requirement of income inclusion described above, the service
provider would be required to pay income taxes, including the additional § 409A
taxes (and any applicable interest on the underpayment of such § 409A taxes),
as applicable. The service recipient would be required to file with the IRS and
provide to the service provider a Form W-2c or corrected Form 1099, as
applicable. If the service recipient and service provider met the requirements for
the correction program, the service recipient would not be liable for any failure to
withhold income taxes on the amount required to be included in income under
§ 409A as a result of the operational failure, to the extent the amounts required to
be included in income had not been paid or made available to the service
provider.
• Some or all of the relief may be available only to service providers that are not
insiders with respect to the service recipient.
VI. SUBMISSION OF COMMENTS
The Treasury Department and the IRS are currently considering formulating
general guidance on the correction of operational failures under a nonqualified deferred
compensation plan resulting in a failure to meet the requirements of § 409A. Some of
the guidance being considered has been set forth in this notice. The Treasury
Department and the IRS request comments on all aspects of a potential corrections
program, including but not limited to the topics addressed in this notice and specifically
request comments on the following:
• With respect to the program under consideration described in § V of this notice,
potential methods of tracking the “investment in the contract” created when an

38
amount is included in income under § 409A but not yet paid to the service
provider.
• With respect to the program under consideration described in § V of this notice,
potential methods of addressing the service recipient’s deduction for payments
made, and the affect of repayments by the service provider to the service
recipient on such deductions.
Comments must be submitted by March 3, 2008. All materials submitted will be
available for public inspection and copying.
Comments may be submitted to Internal Revenue Service, CC:PA:LPD:RU
(Notice 2007-100), Room 5203, PO Box 7604, Ben Franklin Station, Washington, DC
20044. Submissions may also be hand-delivered Monday through Friday between the
hours of 8 a.m. and 4 p.m. to the Courier’s Desk at 1111 Constitution Avenue, NW,
Washington, DC 20224, Attn:CC:PA:LPD:RU (Notice 2007-100), Room 5203.
Submissions may also be sent electronically via the internet to the following email
address: Notice.comments@irscounsel.treas.gov
. Include the notice number (Notice
2007-100) in the subject line.
VII. EFFECT ON OTHER DOCUMENTS
For service recipients and service providers who are entitled to relief under this
notice, Notice 2006-100, 2006-51 IRB 1109 (relating to reporting and wage withholding
for 2006) and Notice 2007-89, 2007-46 IRB 998 (relating to reporting and wage
withholding for 2007) are modified to conform to the provisions of this notice with
respect to (i) the amount that is required to be included in income by a service provider
under section 409A(a), and (ii) the amount that is required to be reported by the service

39
recipient as an amount includible in income under section 409A(a) on Form W-2, Box 1
and Box 12, using Code V, or Form 1099-MISC, Box 7 and Box 15b, as applicable.
VIII. PAPERWORK REDUCTION ACT

The collection of information contained in this notice has been reviewed and
approved by the Office of Management and Budget in accordance with the Paperwork
Reduction Act (44 USC. 3507) under control number 1545-2086.
An agency may not conduct or sponsor, and a person is not required to respond
to, a collection of information unless the collection of information displays a valid control
number.
The collection of information in this notice is in section IV. This information is
required to determine whether the taxpayers claiming the relief are eligible for the relief
and that the applicable requirements for relief are met. The likely respondents are
corporations and individuals.
The estimated annual reporting and/or recordkeeping burden is 5,000 hours.
The estimated annual burden per respondent/recordkeeper is .5 hours.
The estimated number of respondents is 10,000.
The estimated annual frequency of response is on occasion.
Books or records relating to a collection of information must be retained as long as their
contents may become material in the administration of any internal revenue law.
Generally, tax return and tax return information are confidential, as required by § 6103.
IX. DRAFTING INFORMATION
The principal authors of this notice are Stephen Tackney and Bill Schmidt of the
Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government

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Entities), although other Treasury and IRS officials participated in its development. For
further information on the provisions of this notice, contact Stephen Tackney or Bill
Schmidt at (202) 927-9639 (not a toll-free number).