Double Trigger - Protection Period BEFORE a CIC

[WestCoast]

A severance agreement I'm reviewing provides for two possible payouts upon a separation from service. (It's a private company, no chance of ever going public.)

Payout #1 is payment of a severance amount -- annual pay X specified multiple -- within 30 days of separation from service. [intended to be a short term deferral.]

Payout #2 is payment of a higher severance amount -- annual pay X specified multiple X extra change in control multiplier -- within 30 days of separation from service AND the separation from service occurs 90 days prior to or within 180 days after a change in control. This period is the "protection period."

Does the part of the protection period covering the 90 days prior to a change in control work?

I don't have an issue with the part covering the 180 days after a change in control -- it's still a short-term deferral because the payment trigger is the separation from service.

But I cannot get my hands around the pre-change in control protection period.

Is that part of the protection period an impermissible "toggle"? 1.409A-3©(1) provides for limited period (2 yrs. max) toggle FOLLOWING a change in control.

Does the pre-change in control protection period destroy the short-term deferral. Example: Executive separates from service on December 30, 2009. No change in control at that time. He's paid the regular severance on January 29, 2010. But, then there's a change in control on March 19, 2010. So, the company then pays him an additional severance amount using the change in control multiplier formula.

[Steelerfan]

a starting point to analysis would be whether or not there is a substantial risk of forfeiture to the CIC portion. If not, I'd think you'd have a problem with the rule in the final regs that says if there is any potential for a payment to be outside the STD exception, then the whole arrangement is deferred compensation.

I don't understand the facts, the agreement says the second payment ocurrs 30 days after separation, but the CIC occurs well beyond that, so how do you meet the 30 day rule, or am I missing something?

something this complicated should probably be made to comply with 409A.