Protecting Your Deferred Compensation Plan

July 31, 2007

On April 10, 2007, the Treasury Department and Internal Revenue Service (the “IRS”) issued final regulations under Internal Revenue Code Section 409A, which Section became effective on January 1, 2005.  The failure of hedge fund managers with nonqualified deferred compensation arrangements — such as those plans created for the benefit of the managers and employees of hedge funds — to bring such arrangements into written compliance with the final regulations by December 31, 2007, will subject them to early taxation, as well as a 20% penalty tax and additional interest payable to the IRS.

While the actual regulations are lengthy and onerous, below is a brief overview of the new Section 409A regulations of particular importance to hedge fund managers with nonqualified deferred compensation arrangements:

For more information about this e-Alert, please contact Tony Perricone, Chair, Fund Services Group (212.398.5290 or aperricone@sonnenschein.com), Marc D. Teitelbaum, Chair, Taxation Practice (212.768.6749 or mteitelbaum@sonnenschein.com) or your regular Sonnenschein attorney.

Click here to download the full e-Alert.

These materials should not be considered as, or as a substitute for, legal advice and they are not intended to nor do they create an attorney-client relationship. Because the materials included here are general, they may not apply to your individual legal or factual circumstances. You should not take (or refrain from taking) any action based on the information you obtain from this document without first obtaining professional counsel and you should not send us confidential information without first speaking to one of our attorneys and receiving explicit authorization to do so.

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