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409A Correction by Plan Amendment -- Is everyone still sending the Notices under Section XII of IRS Notice 2010-06?


Centerstage
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Prior to acquisition, target company is correcting the Release timing language in Executives' Change in Control ("CIC") Agreements that pay a lump sum within a set time period after involuntary termination within 6 months after a CIC, (subject to delivery of a Release, with no time limit for delivery of the Release, and no language that the payment for such termination won't be made if the Release is not delivered within a set time) by having the Executives sign, before Closing, an Amendment stating that the Release has to be delivered, and irrevocable, within a set number of days after involuntary termination within six months after CIC, and if it is, lump sum will be paid on last day of the time period, and if it is not, lump sum is forfeited. 

For an Amendment like that, which seems to fit Section VI of IRS Notice 2010-06, for 409A corrections, is everyone (or anyone) still sending the Notice to the taxpayer/service provider/Executive the following January, and still attaching the Notice to the service recipient's tax return, as Section XII of Notice 2010-06 requires for Section VI corrections? So difficult to explain to client (employer) and taxpayer (Executive) that putting this Release language in an Amendment means we need to send these lengthy, nearly incomprehensible Notices next year. Just wondering if anyone else is actually doing this? 

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Centerstage, for the 409A corrections that I have done (and they were not exactly for the error you describe, of course, but clearly errors described in and correctable under Notice 2010-06) we have certainly followed the requirements of Notice 2010-06 and provided statements to the employees that they (not us) could file with their 1040's. I am unaware of any subsequent guidance modifying this requirement. The relief provided in Notice 2010-06 is just that, relief, from the consequences (immediate inclusion of the amount in income) of the error, and the relief is conditioned on meeting all of the requirements of the Notice.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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