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Jun22
Compliance with Section 409A

The following is not meant to be legal advice.

 

Treasury Department and the Internal Revenue Service (IRS) final regulations under Internal Revenue Code Section 409A (Section 409A), go into effect January 1, 2008. December 31, 2007 remains the deadline for employers to execute amendments to bring any arrangements subject to Section 409A into compliance.

 

 

Employers will likely be asked to make representations and warranties regarding Section 409A compliance in acquisition and financing documents. In California, violations impose an additional 20 percent state tax on Section 409A income.

Employers should review all arrangements involving deferred compensation to identify which are covered by Section 409A, including discounted stock options, restricted stock units, performance share awards, bonus and commission plans, change in control and severance agreements.

 

 

Even if the plan documents are in order, employers should review operational procedures.   

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