change in form of payment

[Guest Benefitsrock]

An NQDC arrangement provides for a lump sum this year, but the service recipient wants to distribute a life insur. policy in its place. Is this permissible under the regs.? I tend to think it's not permitted but am not positive. Thanks!

[Guest mbw]

An NQDC arrangement provides for a lump sum this year, but the service recipient wants to distribute a life insur. policy in its place. Is this permissible under the regs.? I tend to think it's not permitted but am not positive. Thanks!

I don't believe 409A is concerned about the medium of payment. I haven't explored the issue to know whether you would have other concerns though.

[Steelerfan]

If the life insurance policy had the effect of spreading out or alleviating tax liability while providing a relatively equal value, it would probably be considered a subsitute and could violate 409A. You need to read the rules on subsitituting for deferred compensation.

Before the end of 07, you might be able to use the transition rule to change the execs current election and distribute the LI policy in 08 lieu of the lump sum.