409A - "Amount Deferred"

[Guest long]

Clients has an employment agreement with change in control definitions broader than IRC 409A allows. No amounts are actually deferred under the agreement -- the change in control payment is the only provision that triggers IRC 409A. If Client fails to amend their employment agreement to comply with the final IRC 409A regs by 12/31/07, it is subject to a tax on the "amount deferred." (Treas. Decision 9321.) But in this case, there is no amount deferred. Or do we treat the prospective change-of-control payment as the amount deferred for purposes of the penalty? Any insights would be appreciated.

[Steelerfan]

Clients has an employment agreement with change in control definitions broader than IRC 409A allows. No amounts are actually deferred under the agreement -- the change in control payment is the only provision that triggers IRC 409A. If Client fails to amend their employment agreement to comply with the final IRC 409A regs by 12/31/07, it is subject to a tax on the "amount deferred." (Treas. Decision 9321.) But in this case, there is no amount deferred. Or do we treat the prospective change-of-control payment as the amount deferred for purposes of the penalty? Any insights would be appreciated.

If there is a current legal right to payment at a CIC date, then there is an "amount deferred". Although I think there is more guidance needed on determining the "amount deferred", I'd assume the payment constitutes an "amount deferred" for now. It sounds as if you ought to have an attorney review this arrangement and make a recomendation for plan document compliance with 409A.