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Found 3 results

  1. I was wondering if anyone had direct experience or could point to guidance on an acceleration of payment/acceleration of vesting question. The regulations clearly permit an acceleration of vesting (Treas. Reg. 1.409A-2(j)(1)). For example, if an amount of deferred compensation vests after ten years and is payable upon a separation from service, it is not a violation for the service recipient to reduce the vesting requirement to five years, even if a service provider receives a payment in connection with a separation from service before the initial ten year period. What if the payment provision provided that a service provider would receive a payment of deferred compensation upon a separation from service that occurs after the participant reaches age sixty. Would an amendment to the Plan that provides a payment upon a separation from service at age 55 be compliant under the above reference provision (i.e. changing a condition constituting a substantial risk of forfeiture), or would it be considered an acceleration of a payment. The effect appears to be the same, but does the condition being in the payment event provision rather than a vesting provision change the nature of the amendment. Curious to hear what everyone thinks, or whether it is clearly answered anywhere.
  2. Employer wants to reduce the deferred compensation benefit paid at termination of employment from $2.5M to $2M? Is this permissible if we keep the same time and form of payment and the parties agree? The 409A regulations (26 CFR 1.409A-1(c)(3)(vi)) envision that it is permissible to increase the benefit but I do not see any express approval of reducing the benefit.
  3. Does anyone understand why having a different time and form of payment for each annual deferral election doesn't violate "one time and form of payment per plan" rule under 1.409A-3(I)(1)(i)? I'm confused by IRS answer to Q #13 in 2015 ABA Section of Taxation, Committee on Employee Benefits May 8, 2015 meeting: "13. Section 409A - One Time and Form of Payment Treasury Regulation Section 1.409A Section 1.409A-3(c ) provides that a plan may designate only on time and form of payment upon the occurrence of events such as a separation from service, with a limited exception if the event occurs before a specified date, such as a retirement age. How does this rule apply if participants are allowed to designate for each year's deferral a different post-retirement starting date and form? For example, what if a participant designates that 2014 salary deferrals be paid 5 years after retirement in a lump sum, and that 2016 deferrals start at retirement date in a 10-year installment form? Has the plan violated the requirement that only one time and form of payment may be offered after separation from service? Proposed Response: Although Treasury Regulations Section 1.409A-3© refers to a limit per plan, it was not meant to provide that all deferrals under the plan be so limited, provided that the payment of each yearly deferral, with deemed investment earnings on that amount, can be objectively determined under Treasury Regulation Section 1.409A-3(i(1)(i. IRS Response: The Service representative agrees with the proposed response. Deferrals for each year are separate deferred amounts to which the time and form of payment rules apply separately." Can anyone explain why? If the deferrals are all in an account balance plan, aren't they aggregated, within the plan and with other account balance plans, for purposes of this rule? Can we rely on this IRS answer? Thanks.
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