409A Guidance on Nonqualified Deferred Compensation Plans: Compliance Strategies

BARBRI

This CLE course will provide employee benefits counsel and advisers with a detailed review of the regulations under 409A. In addition, the panel will outline the existing 409A regulations, address lingering questions under tax reform, and review compliance/exemption strategies.

Description

IRC Section 409A establishes a sophisticated regime for regulating "nonqualified deferred compensation plans" which imposes strict requirements in order for a plan to be tax-deferred. Failure to adhere to such requirements results in the inclusion of deferred amounts in gross income as they vest as well as taxation at penalty rates.

To maintain the benefits of a nonqualified deferred compensation plan and avoid these consequences, counsel must understand: (1) the scope of Section 409A (and its relationship with related doctrines, such as the common law concept of construction receipt and Section 457A); (2) the exemptions under Section 409A, such as the short-term deferral exemption and the severance pay plan exemption; (3) the permitted payment events that comply with Section 409A, such as payments on death, a separation from service, change in control payments, and under certain earn-outs or escrows in mergers; and (4) the remedies or solutions available if an arrangement violates Section 409A and the deadlines for any such corrections.

Listen as our panel highlights the critical aspects of 409A regulations and strategies for compliance. Additionally, the panel will discuss unanswered questions and new questions that may arise under tax reform.

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