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27th Payroll in 2015 and 409A

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NQDC plan benefit is a percentage of the employee's annual compensation. In 2015, as a result of a 27th pay period, Employer ended up paying him more than it has in 2014 and prior years. In 2016, they will adjust what they plan on paying him, in order to account for the extra payment in 2015. In 2017, they will be back on schedule to pay 26 pay periods for the same total as he was given in 2014 and prior years.

Is this an impermissible acceleration in 2015 and potential under payment in 2016? If so, is there an exception under 409A that the company can use? Do you have any other suggestions for how the company could handle the extra payroll/payment and subsequent adjustment?

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If I understand correctly, and the NQDC plan benefit is simply stated as a percentage of his pay for the year, I don't think you have any problems. They can give him a pay raise one year, then a pay cut the next, but as long as they provide him the same percentage of his pay for each year in the NQDC plan, I don't see an issue.

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They plan to adjust what they pay him in 2016 down because there were 27 pay periods in 2015? Wow, I don't think I ever heard of anything chintzier than that in my entire life!

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If this employee belongs to a "select group" for an unfunded deferred compensation plan, one wonders whether his pay is governed by a written employment agreement.

And if there is such an agreement, how does it express his pay?

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They plan to adjust what they pay him in 2016 down because there were 27 pay periods in 2015? Wow, I don't think I ever heard of anything chintzier than that in my entire life!

Our firm will end up with 27 pay periods in 2016. All salaried employees were notified in mid-December that our paychecks would be adjusted accordingly starting 1-1-2016. Of course, since that was a holiday, the paychecks were delayed until 1-4.

You gotta love working for penny pinchers!

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