ERISA-Bubs Posted December 12, 2014 Share Posted December 12, 2014 We have a change in control plan where if there is a change in control followed by termination, the executives get a separation payment.For 280G reasons, we want to reduce the separation payment and give the participants a bonus equal to the reduction in the separation payment. We anticipate a change in control next year. Is this OK, or does it constitute an impermissable acceleration?Are there any 280G issues I"m missing? Link to comment Share on other sites More sharing options...
jpod Posted December 12, 2014 Share Posted December 12, 2014 Is the CIC bonus structured as a short-term deferral? If so, I don't believe it is an impermissible acceleration. The payment this year may be in contemplation of a CIC and taken into account as a parachute payment, if there is a CIC, but the upside is that you've increased the base amount by 20% of the payment made this year. Link to comment Share on other sites More sharing options...
ERISA-Bubs Posted December 12, 2014 Author Share Posted December 12, 2014 Unfortunately the CIC bonus is not a short-term deferral -- the bonus will meet the definition of "deferred compensation" under the regs. Does this mean it's an impermissible acceleration? Does it matter that no one is vested in anything yet? Link to comment Share on other sites More sharing options...
jpod Posted December 12, 2014 Share Posted December 12, 2014 I'll just say this: I have struggled with that exact issue several times over the years and I have never been able to get completely comfortable with the position that it is not an acceleration. david rigby and ERISA-Bubs 2 Link to comment Share on other sites More sharing options...
Blackbirch Posted January 12, 2015 Share Posted January 12, 2015 ...I have never been able to get completely comfortable with the position that it is not an acceleration. I have to agree. Simplify the question by eliminating the CIC (which I understand doesn't help your underlying 280G question). What you're left with is the direct replacement of deferred compensation with a current payment. This differs somewhat from the traditional notions of acceleration because it requires employer consent (as opposed to occurring upon employee election), but I don't see the anti-acceleration rules making a distinction based on whether the employer consents. If such a "reduce and replace" technique were permissible, much of the 409A rules would be inoperative. In that case, all plans would be designed to push both vesting and distribution out as far as possible with the understanding that both could be accelerated at the employer's whim, giving the parties the exact control and flexibility that 409A is designed to deny them. I also seem to recall something in the regs that would treat any such replacement payments/agreements as part of the same plan, making the impermissible acceleration all that much more naked, but I don't have my regs in front of me. Link to comment Share on other sites More sharing options...
Blackbirch Posted January 20, 2015 Share Posted January 20, 2015 I also seem to recall something in the regs that would treat any such replacement payments/agreements as part of the same plan, making the impermissible acceleration all that much more naked, but I don't have my regs in front of me. I now have my regs in front of me. I'm looking at 1.409A-3(f), the key provisions of which are, IMHO: Except as otherwise provided under these regulations, the payment of an amount as a substitute for a payment of deferred compensation will be treated as a payment of the deferred compensation. and Even where there is no explicit reduction or offset, the payment of an amount or creation of a new right to a payment proximate to the purported forfeiture or voluntary relinquishment of a right to deferred compensation is presumed to be a substitute for the deferred compensation. Link to comment Share on other sites More sharing options...
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