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  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. Looking for thoughts on an issue of first impression for me. Company A is the parent of Company B. Employees of Company B participate in a nonqualified deferred compensation plan maintained by Company A. Company A spins off Company B and, for business reasons, does not terminate the NQDC plan as to the employees of Company B (as would be permitted under Section 409A's termination rules in connection with a change in control). Employees of Company B have not undergone a separation from service because of the spin off because they still work for Company B. Company A retains the pre-spin liabilities relating to the NQDC plan and arranges for Company B to notify Company A when an employee separates from service with Company B (and all the post-spin entities in Company B's new controlled group) so Company A can commence payment under the NQDC plan. Following the spin-off, for business reasons, Company A and Company B want to allow employees of Company B to continue to participate in the NQDC plan maintained by Company A for a period of years. Can employees of Company B participate in the NQDC plan maintained by Company A once Company B is no longer in Company A's controlled group of corporations? If Company B wants to provide the same benefit post closing, does Company B need to set up its own NQDC plan that "mirrors" Company A's? What about funding - If Company B sets up its own NQDC plan, can Company B send the contributions to Company A to administer and not result in income inclusion under a constructive receipt/economic benefit theory because the contributions are no longer subject to the claims of the creditors of Company B? It seems to me that Company B can leave behind with Company A the pre-spin liabilities relating to the NQDC plan without issue. Keeping any assets related to those liabilities with Company A makes sense because Company A is responsible for payment. Post-spin participation of Company B employees in Company A's NQDC plan seems problematic but can't nail down exactly why. It also seems that if Company B sets up its own mirror plan, any funding must be left with Company B or be put in a rabbi trust that is subject to the claims of Company B's creditors. Sending contributions for post-spin obligations to Company A, or putting in the rabbi trust for the NQDC plan maintained by Company A (which is subject to claims by Company A's creditors) seems problematic because the amounts are no longer reachable by Company B's creditors.
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