More on 409A Compliance

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Understanding 409A compliance will save tax dollars for you and your employees.

The deadline for amending all deferred compensation plans and agreements to bring them into documentary compliance with the deferred compensation tax requirements of Section 409A of the Internal Revenue Code is December 31, 2008 (good faith operational compliance is already required). All compensatory arrangements subject to Section 409A must be in full documentary compliance with the final regulations on and after January 1, 2009 in order to avoid negative tax implications for businesses and individuals.

The coverage of Section 409A is extremely broad. In addition to traditional nonqualified deferred compensation arrangements, Section 409A covers:

  • Offer letters
  • Employment agreements
  • Change in control and severance agreements
  • Reimbursement agreements
  • Expense reimbursement policies
  • Retention agreements
  • Phantom stock or phantom units
  • Restricted stock units
  • Discounted stock options and stock appreciation rights
  • Certain other equity compensation arrangements
  • Annual and multi-year bonus plans
  • Separation pay plans and agreements
  • Salary continuation arrangements

For your convenience, here is a link to Perkin Coie’s most recent client Update on this, dated June 4, 2008

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