Navigating Section 409A Nonqualified Deferred Compensation Taxes and Audits: Challenges for Employers and Employees

BARBRI

This CLE/CPE course will provide program attendees with a detailed analysis of the tax implications of nonqualified deferred compensation under Section 409A of the Internal Revenue Code. The panel will discuss the background of Section 409A, basic Section 409A rules, definitions and exceptions, the initial and subsequent deferral election rules, the six-month delay requirement, the plan aggregation rules, penalties and corrections under Section 409A, common Section 409A pitfalls, and other issues under Section 409A (including those that frequently arise in the context of M&A transactions).

Description

A nonqualified deferred compensation plan is a plan that provides a legally binding right in one taxable year to compensation that is or may be payable in a later taxable year. A surprisingly broad range of commonplace compensation agreements, plans and programs (including many employment agreements, severance plans, and equity-based awards) may qualify as nonqualified deferral compensation plans within the meaning of Section 409A.

Nonqualified deferred compensation plans are ripe with potential tax pitfalls. To avoid taxes and penalties under Section 409A, counsel, compensation advisers and HR/Total Rewards executives must have knowledge relating to the following: (1) the reach of Section 409A, (2) the common exceptions from Section 409A (such as the short-term deferral exception and separation pay plan exception), (3) the permitted payment events that comply with Section 409A (such as payments on death, disability, unforeseeable emergency, separation from service, change in control, and payment on a specified payment date), and (4) the corrections and solutions available, or unavailable, if a compensation arrangement violates Section 409A.

Listen as our panel discusses the background and application of all aspects of Section 409A.

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