I believe Section VI. A. of the preamble to the 409A regulations answers this, but I wanted to see if anyone else had any insight on this. If an employee makes a deferral election for 2009 by 12/31/08, can the company decide to freeze the plan and cancel this deferral election in March 2009 without causing a 409A problem? The preamble section I mentioned seems to suggest that it can not do so. The fact that the regulations specifically mention only disability and hardship as eligible for a change an election also seems to support this answer. Any thoughts?

Can't do it. Any such employer-induced "freeze" would violate the anti-acceleration rule.

I believe the employer would be okay to freeze the Plan to new deferrals. All Plans provide that the employer/committee may shut it down. If the freeze is applicable only to new deferrals and is made prior to those (physical) deferrals, I don't believe there is an acceleration issue/409A issue simply because the employee has been dissallowed the opportunity to defer income. I'm not so certain that is considered to be a change to an election and it is certainly not in the participant's control. I can tell you that I have absolutely seen this occur in our post-409A world. The alternative, if I'm hearing right, would be to plan this year to shut down (to new deferrals) next year and not accept any new elections.

Yes, there is an acceleration. The money that the employee elected to have paid some later year comes into the employee's hands in the year of the freeze. The particpant's opportunity to defer income ended December 31 of the year before the freeze. "Participant's control" is a concept that 409A expressly trumps.