TaxLawyer1978 Posted February 27, 2018 Share Posted February 27, 2018 Can a bonus plan can provide for both (a) payment of X amount if person employed on Y date, and otherwise if you're not employed on Y date, you don't get paid regardless of the reason for the earlier termination of employment (e.g. no payment even if termination prior to Y date was because of death, disability, etc.) AND (b) Board "may elect, in its sole discretion" (presumably as of date Y) to pay one or more participants who are not employees on Y date such that the participant, even though not employed on date Y, still gets the payment. I believe the answer is NO. But confirming. This is something that the client has drafted and sent for review. Thanks Link to comment Share on other sites More sharing options...
jpod Posted February 27, 2018 Share Posted February 27, 2018 The Board can do whatever the heck it wishes to do. If you are asking whether the Board doing this can create a 409A problem for the employee, your facts aren't perfectly clear but my guess is that it will not. Link to comment Share on other sites More sharing options...
TaxLawyer1978 Posted February 27, 2018 Author Share Posted February 27, 2018 thanks. the facts are that the employee gets the payment only if employeed on date Y, but the board wants the option to pay them if for example they're no longer employed as of date Y because of disability. but the decision would not be made by the Board until date Y. And yes, the question is whether this creates any 409A issues? I believe the answer is NO, because I don't see how it would create an issue, but wanted to make sure. Thanks Link to comment Share on other sites More sharing options...
XTitan Posted February 27, 2018 Share Posted February 27, 2018 Assuming 409A applies, and with bonuses payable upon a specific date you may be living in short-term deferral land, the substitution rules wouldn't apply, so I can't see any issues either. - There are two types of people in the world: those who can extrapolate from incomplete data sets... Link to comment Share on other sites More sharing options...
TaxLawyer1978 Posted February 27, 2018 Author Share Posted February 27, 2018 the first payment is March 31 but the second is Dec 31 Link to comment Share on other sites More sharing options...
Luke Bailey Posted February 27, 2018 Share Posted February 27, 2018 Change your "presumably as of date Y" to "as of date Y," and you're not changing the time of payment, just the executive's vesting. That should be OK under 409A. TaxLawyer1978 1 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
TaxLawyer1978 Posted February 27, 2018 Author Share Posted February 27, 2018 Thanks Luke Bailey. Link to comment Share on other sites More sharing options...
Luke Bailey Posted February 27, 2018 Share Posted February 27, 2018 You're quite welcome, TaxLawyer1978. A good year, btw. TaxLawyer1978 1 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Bob the Swimmer Posted February 28, 2018 Share Posted February 28, 2018 We typically have a matrix of plan events--such as disability or death or involuntary term without cause if they apply in our AI plan documents. This could all also be solved by a provision covering that and not leaving it to the Board's discretion. Just a thought Link to comment Share on other sites More sharing options...
gc@chimentowebb.com Posted March 3, 2018 Share Posted March 3, 2018 Not sure I see a 409A issue. There is no legal right to a bonus on your facts until the Board makes its decision and then pays the amount. There is no deferral in a situation like this. Link to comment Share on other sites More sharing options...
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