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Subsequent Deferral on PART of a Payment


ERISA-Bubs

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Under 409A a participant can change form of payment so long as, generally, the change doesn't take effect for a year and the payment is deferred an additional 5 years from when it otherwise would have been paid. I know there are some nuances, but I'm not concerned with those.

If an employee has one payment scheduled at termination of employement, can he make a subsequent deferral just on half of that payment?

For example, participant is to receive $10,000 on termination. Can he make a subsequent deferral election at least one year in advance to receive $5,000 5 years after termination--the other $5,000 still payable on termination?

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Guest AdminJD
Under 409A a participant can change form of payment so long as, generally, the change doesn't take effect for a year and the payment is deferred an additional 5 years from when it otherwise would have been paid. I know there are some nuances, but I'm not concerned with those.

If an employee has one payment scheduled at termination of employement, can he make a subsequent deferral just on half of that payment?

For example, participant is to receive $10,000 on termination. Can he make a subsequent deferral election at least one year in advance to receive $5,000 5 years after termination--the other $5,000 still payable on termination?

Yes. You can generally do this so longs as you can separately identify the payment amount, as by percentage or a fixed amount as you have suggested. See 1.409A-2(b)(2)(i) defining term "payment".

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