The IRS has issued regulations updating the requirements for deferred compensation agreements under code section 401(k) and 401(m). Prior to issuing the new rules, no amendments had been made since 1994. The new regulations will be effective January 1, 2006, although they may be implemented earlier in 2005, if desired.

Employers rely on third party administrators to manage their plans properly and only need a good working knowledge of how the plans actually work. Therefore, employers may wish to ask plan administrators to provide them an overview of the changes.

Changes are made in the areas of elective contributions, withdrawals, testing, matching contributions, and safe harbors. Contact your plan administrator for more information.