Grandfathering of In-Kind Benefit

[Guest kodle]

In 1995, Client promised executive 2 weeks use of a hunting lodge for each year for 30 years if the executive remained employed until December 31, 2004 (love that date, don't you?). Certainly looks like a vested right as of 12/31/2004 that would be grandfathered under 409A. The 1995 document also allowed the employee to elect at any time to cash out his right to use the lodge in the future for a specified dollar amount (which is reduced each year that he uses the lodge). The entire arrangement still looks grandfathered to me (whether there is constructive receipt because of the cash out right is another story). Anyone disagree?

[jpod]

I agree on the 409A grandfathering, assuming there was in fact vesting before 2005 (as opposed to backdating or a lame attempt to make the vesting "as of" 12/31/04. Also, absent more facts I am inclined to agree with your implicit statement that there was constructive receipt as of the first date on which he could have elected an immediate cash payment.

Kind of off topic, but just out of curiosity, what happens if he dies before the 30 years are up? How was the FICA/Medicare handled under 3121(v) for 2004?

[Guest kodle]

ipod, thanks for your comments.

Good questions on what they did about constructive receipt, FICA, death, etc.. This is just one of the skeletons that the 409A review brought out of the closet!