Structuring Employee Severance/Separation Arrangements: Revisiting Section 409A and Its Impact on Deferred Compensation

Strafford

This CLE course will provide counsel with guidance on structuring employee severance or separation agreements to comply with Section 409A's restrictions on deferred compensation. The panel will discuss key provisions of severance and separation agreements, application of Section 409A and available exemptions, accelerating the vesting of equity awards, and other key considerations.

Description

Drafting agreements when an executive is currently operating in a company can be complicated. These arrangements often involve negotiating separation pay, the continuation of benefits, and treatment of other compensation such as equity grants.

In addition, most severance arrangements are potentially subject to Section 409A and must be appropriately structured to avoid adverse tax consequences. Failure to comply with 409A's strict rules can result in severe penalties, including a 20 percent excise tax and immediate taxation of vested deferred amounts.

Listen as our experienced panel of employee benefits attorneys explains the critical requirements of 409A and discusses the steps counsel should take to ensure compliance given the IRS focus. The panel will outline best practices for reviewing nonqualified deferred compensation plans, employment agreements, and other severance arrangements.

Outline

1. 409A issues to be considered in severance plans and agreements
2. Severance benefits subject to 409A
3. Severance benefits exempt from 409A
4. Impact of accelerating the vesting of equity awards upon termination of employment on 409A
5. Discussion of change in control severance arrangements and "regular" severance for purposes of 409A
6. Importance of the definition of "good reason" for 409A purposes
7. Can severance benefits that are subject to 409A be conditioned on a release?

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