Moving Expense Reimbursement subject to 409A?

[J Simmons]

ER pays $20,000 to new EE for moving expenses under agreed terms that if the EE does not remain employed for 2 years the EE will repay the ER the $20,000.

Is this subject to 409A? It would be much like the ER having given the EE a $20,000 loan at date of hire and agreeing to a $20,000 bonus after 2 years of employment, paid by offsetting the $20,000 the EE otherwise owes the ER due to the loan.

Treas Reg § 1.409A-3(f) addresses offsets as substitutes. I'm interested in your thoughts and comments.

[Just Me]

This doesn't seem like 409A deferred compensation to me. Although it may appear much like a loan in the general sense of the word, for tax purposes it is not treated like a loan at all because upon the initial payment of the reimbursed expenses, they are taxable and includible on Form W-2. I wouldn't think that the IRS would argue that the expiration of the period of time during which an amount paid (and taxed) is subject to a claw-back would be the same as a promise to deliver a bonus in the future. Especially since the employee has the cash now and is taxed on it. Just my 2 cents.

[Guest Harry O]

Assuming the $20,000 was a reimbursement of nondeductible moving expenses and was taxable to the employee upon receipt, there is no tax being deferred and 409A is not relevant. If the $20,000 reimbursed deductible moving expenses (e.g., movement of household goods), the reimbursement is nontaxable under section 217 and again 409A is not relevant.