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Code Section 409A…Here Today but Possibly Gone Tomorrow and Other Proposed Changes in the Tax Cuts and Jobs Act

Last week the House unveiled its tax overhaul plan, the Tax Cuts and Jobs Act (“Act”).  The Act’s proposals related to employee benefits and compensation are as follows:

Nonqualified Deferred Compensation

Perhaps one of the most talked about aspects of the Act (at least among benefits practitioners) is the demise of Code section 409A and the creation of its replacement, Code section 409B.

Under the proposed Code section 409B regime, nonqualified deferred compensation would be defined broadly to include any compensation that could be paid later than the March 15 following the taxable year in which the compensation is no longer subject to a substantial risk of forfeiture, but with specific carve-outs for qualified retirement plans and bona fide vacation, leave, disability, or death benefit plans.  Stock options, stock appreciation rights, restricted stock units, and other phantom equity are included expressly in the definition of nonqualified deferred compensation.

All

Good News! New 409A Regulations (Yes, Really!) – Part 5: If it Ain’t Broke, Don’t Fix It (and Other Minor Changes)

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

Good News! New 409A Regulations (Yes, Really!) – Part 4: Getting Paid

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

Good News! New 409A Regulations (Yes, Really!) – Part 3: Don’t Fear the (409A) Reaper

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

Good News! New 409A Regulations (Yes, Really!) – Part 2: Taking (and Giving) Stock

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.  Additionally, taxpayers can rely

Good News! New 409A Regulations (Yes, Really!) – Part 1: Firing Squad

Good NewsOn the TV show Futurama, the aged proprietor of the delivery company Planet Express, Professor Hubert J. Farnsworth, had a habit of entering a room where the other characters were gathered and sharing his trademark line, “Good news, everyone!”  Of course, his news was rarely good.  More often, it was the beginning of some misadventure through which the other characters would inevitably suffer, often to great comedic effect.  So we can forgive you for thinking that we may be standing in his shoes when we tell you that new 409A regulations are good news, but really, hear us (read us?) out.

The IRS released proposed changes to both the existing final regulations and the proposed income inclusion regulations.  And the news is mostly good.

The changes are legion,

Five Key Considerations When Drafting a Release

Five Key Considerations When Drafting a Release

July 2, 2014

Authored by: Bill Wortel and benefitsbclp

Employment Termination and ReleaseSeparation agreements almost always contain release provisions whereby one or both parties agree to waive claims that they may have against the other party; when the employee releases claims, he or she typically gains compensation or a benefit that he or she is not already entitled to receive.  In a world in which every terminated employee is a potential plaintiff, employers should have a good grasp on how to draft a valid and enforceable release in a separation agreement.  Here are five tips every employer should consider when drafting this type of a release.

Tip No. 1:  Offer Valid Consideration

In order to have a valid and enforceable release agreement, the employer must provide the employee with payments or benefits the employee is otherwise not entitled to receive.  Therefore,

409A Day Comes a Day Early This Year

As we have noted previously, March 15 is tax “Code Section 409A Day.”  For employers with calendar fiscal years, that is generally the last day an amount can be paid and still qualify as a short-term deferral that is exempt from 409A’s stringent timing and form of payment requirements.  But what does one do when March 15 falls on a weekend, as it does this year?  You likely aren’t cutting payroll checks on a Saturday.  Can you wait until Monday to pay?

The answer is no.  The rules are clear that the payment generally has to be made by the 15th day of the 3rd month (hence, March 15) of the year following the year in which either the right to the compensation arises or the compensation is no longer subject to a substantial risk of forfeiture (and note that for this purpose, the 409A definition

Before the Ball Drops for the New Year, Don’t Forget to Address These 2013 Employee Benefit Items!

Qualified Plans

  • If your plans are filed in “Cycle C” for determinations letters (i.e., plan sponsor’s EIN ends in 3 or 8), address items needed for the IRS filing before the end of the year. The filing deadline is January 31, 2014, but notices to “interested parties” must be distributed no later than 10 days before the filing. Set that filing date and prepare the plan restatement before the ball drops.
  • If your company did not timely adopt a written 403(b) plan document, you may qualify for a reduced compliance fee under the IRS’ correction program, but only if the filing is made before the ball drops.
  • Most defined benefit plans have been amended to incorporate the benefit accrual and distribution restrictions that apply if the plan’s funding drops below certain thresholds. These Code Section 436 rules must be added to your defined benefit plan by written amendment before

409A – Is Your Compensation Arrangement Subject to These Rules?

The 409A rules do not provide a clear roadmap to determine what compensation arrangements are subject to their regime of requirements and restrictions.  In this brief video, Brian Berglund provides a description of the approach you should take to evaluate whether your compensation arrangement should be structured to comply with the 409A rules regarding deferral elections, timing of payments and other requirements.

(You can also view the video by going here.)

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