Benefitsgirl
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Tuesday
Dec272011

409A Nonqualified Deferred Compensation Plans

I spent an hour listening to a discussion of section 409A Nonqualified Deferred Compensation Plans.  The regulations relating to section 409A plans were purportedly from the wake of Enron, where I am told Enron's executives deferred compensation plans were sped up to get them paid prior to the bankruptcy.  The IRS understandably doesn't want people being able to mess around with this.  However, the 409A rules seem really complex and the penalties for running afoul of the requirements are draconian.  Noncompliance means that all amounts payable for the duration of the agreement become taxable immediately and subject to a 20% excise tax plus a premium interest tax that I am told is hard to calculate.  It appears to be the sort of thing that an Employer could inadvertantly fall into with terrible consequences.

http://www.irs.gov/irb/2007-19_IRB/ar07.html 

Here are the regs, very interesting read.

 

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