Performance-Based Compensation

Does it matter if performance-based compensation is substantially certain to be paid at the time of the deferral election?

I know the regulations only state that it cannot be considered performance-based compensation if the performance criteria are substantially certain to be met at the time the criteria is established.  Does it matter if the criteria is substantially certain be met at the time of the election?  For example, if the criteria is not substantially certain to be met at the time the criteria is established, but all the criteria is met by the time the election is made (i.e. 6 months prior to the end of the performance period), is the compensation still performance-based at that time?

I could swear I saw something about this in the past, but now I'm only seeing guidance talking about the time the criteria is set, not about the time of the election.

Thanks in advance!

See 1.409A-2(a)(8), which deals with the deferral election timing of performance-based compensation, particularly the second half of the paragraph about making a deferral election once the compensation is "reasonably ascertainable." I think that's the piece you're looking for.

The uncertainty of meeting the performance goal when the criteria are set is dealt with in 1.409A-1(e)(1), which defines performance-based compensation.

1 hour ago, EBECatty said:

See 1.409A-2(a)(8), which deals with the deferral election timing of performance-based compensation, particularly the second half of the paragraph about making a deferral election once the compensation is "reasonably ascertainable." I think that's the piece you're looking for.

The uncertainty of meeting the performance goal when the criteria are set is dealt with in 1.409A-1(e)(1), which defines performance-based compensation.

 

Yes, that is exactly what I was looking for.

For anyone reading this, the above says that a participant cannot elect to defer any portion of the performance-based compensation once that amount has become "readily ascertainable" (i.e. once the amount is calculable and substantially certain to be paid).

Thanks EBECatty!