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Code 409A's Grandfathering Rules

Overview - see this Alert (2016.04.29)

Material Modifications - Relevant Authorities:

Treas. Reg. 1.409A-6(a)(1)(i):
. . .  For amounts deferred in taxable years beginning before January 1, 2005, under a plan that is materially modified after October 3, 2004, whether the plan complies with the requirements of section 409A and these regulations is determined by reference to the terms of the plan in effect as of, and any actions taken under the plan on or after, the date of the material modification.

Preamble to final 409A Regulations (PDF pages 168-169):
Commentators requested clarification of the effect of a material modification of a plan. The specific consequences of a material modification of a plan are being considered as part of the anticipated guidance related to income inclusion and calculation. However, the final regulations provide that for amounts deferred in taxable years beginning before January 1, 2005, under a plan that is materially modified after October 3, 2004, whether the plan complies with the requirements of  section 409A is determined by reference to the terms of the plan in effect, and any actions taken under the plan, on and after the date of the material modification. Accordingly, where the materially modified plan is compliant with  section 409A and these regulations immediately following the material modification, the material modification generally will not itself result in a violation.