409A Separation from Service Issue

[Guest eak]

Has anyone run accross anything (or have any thoughts) addressing whether a 409A Separation from Service will occur if one moves from being a common law employee to an independent contractor/consultant.

I'm involved in a situation where key employee of a publicly traded company is stepping down but will remain as a consultant. The key employee will no longer have his current title (i.e., the employer will hire a replacement). He will not have the same duties as before. Will this be considered a separation from service so as to permit the executive to start receiving, in 6 months, his benefits under the nonqualified plan.

[Ron Snyder]

This sounds like a question that should be addressed in the plan document in preparing the update (prior to 12-31-05) to bring the plan into compliance. It could be handled either way, but the handling and the documents need to be consistent.