Proposed Section 409A Regulations Facilitate Common Pay Practices

Pillsbury Winthrop Shaw Pittman LLP
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The Internal Revenue Service (IRS) has proposed a number of updates to current regulations governing nonqualified deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended. The proposed updates clarify a number of ambiguities that raised compliance concerns with standard practices relating to stock option grants and settlements, bonuses and severance payments. The proposed regulations would also permit changes in the timing of payments complicated by securities law compliance or recipient deaths. Finally, the proposed regulations seek to penalize repeat offenders and promote use of the correction methodologies described in the IRS’s Section 409A correction program.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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