Deferred Comp Payouts Prior to 1/1/08

[Guest jensenro@gmail.com]

NQDC plan provides that executive is to be paid out in 3 annual installments starting shortly after 10/31/07. Plan also provides that company may accelerate payments and payout in lump sum. Company is actually going to payout executive in one lump sum payment prior to 1/1/08. Any need to comply with 409A?

[Steelerfan]

NQDC plan provides that executive is to be paid out in 3 annual installments starting shortly after 10/31/07. Plan also provides that company may accelerate payments and payout in lump sum. Company is actually going to payout executive in one lump sum payment prior to 1/1/08. Any need to comply with 409A?

Of course there's a need to comply with 409A, and it doesn't sound like anyone thought about it.

Based on what you've said, this looks like an impermissible acceleration (you can't choose between the two payout forms after the LBR attached.) Why can't you use the transition rule to change the time and form of payment and pay in a lump sum on 1/1/08? Don't wait until it's too close to the end of the year.

[Guest jensenro@gmail.com]

NQDC plan provides that executive is to be paid out in 3 annual installments starting shortly after 10/31/07. Plan also provides that company may accelerate payments and payout in lump sum. Company is actually going to payout executive in one lump sum payment prior to 1/1/08. Any need to comply with 409A?

Of course there's a need to comply with 409A, and it doesn't sound like anyone thought about it.

Based on what you've said, this looks like an impermissible acceleration (you can't choose between the two payout forms after the LBR attached.) Why can't you use the transition rule to change the time and form of payment and pay in a lump sum on 1/1/08? Don't wait until it's too close to the end of the year.

Thanks. I understand that it is an impermissible acceleration, but if the company decides to pay this person out completely (and actually does so), prior to 1/1/08, do they still need to amend the time and form of payment in the plan document?

[QDROphile]

Transition rule is not available to postpone a payment scheduled for 2007.

[Steelerfan]

Transition rule is not available to postpone a payment scheduled for 2007.

Right. Maybe installments 2 and 3 could be paid in 08 and the first installment be made as scheduled. I don't see how an accelerated payment of the full amount in 07 can be accomplished without penalty.

The plan should be amended to comply with actual operation, but it wouldn't save you from a penalty for an impermissible acceleration, so why bother.

[Guest Perseo]

Any chance the arrangement in question is grandfathered?

[XTitan]

Any chance the arrangement in question is grandfathered?

Depends - when were the deferrals earned and vested?

[Guest jensenro@gmail.com]

Any chance the arrangement in question is grandfathered?

Depends - when were the deferrals earned and vested?

Deferrals to vest on 10/31/07.

[XTitan]

Any chance the arrangement in question is grandfathered?

Depends - when were the deferrals earned and vested?

Deferrals to vest on 10/31/07.

Based on the posted facts, no grandfathering.