Section 409A

Section 409A is a section of the United States Internal Revenue Code enacted in 2004 as part of the American Jobs Creation Act and applies to compensation that a worker earns in one year, but that is paid in a... more +
Section 409A is a section of the United States Internal Revenue Code enacted in 2004 as part of the American Jobs Creation Act and applies to compensation that a worker earns in one year, but that is paid in a future year. If deferred compensation meets the requirements of Section 409A, then the earner's tax liability is the same as it would be for other types of compensation. If deferred compensation does not meet the requirements of Section 409A, then the earner is subject to certain additional taxes.  less -
News & Analysis as of

IRS Limits Correction Opportunities under Section 409A Proposed Income Inclusion Regulations and Imposes 20% Penalty

In Chief Counsel Advice 201518013 (May 1, 2015) (the "CCA"), the IRS addresses an executive retention bonus that originally vested after three years and was payable in equal installments on the first two anniversaries of the...more

IRS Rules Retention Arrangement Violates 409A

In a Chief Counsel Memorandum issued last month, the IRS concluded that an executive retention arrangement violated Section 409A despite the employer’s efforts to correct the arrangement before the retention bonus vested....more

Chief Counsel Memorandum Clarifies IRS Position on Informal 409A Corrections

On May 1, the IRS released a Chief Counsel Memorandum that clarifies the IRS’ position with respect to the correction of deferred compensation arrangements outside of the IRS’ formal Section 409A correction programs....more

Does Your Retention Bonus Plan Violate IRS Code?

In a memorandum released earlier this month, the IRS Office of Chief Counsel ruled that a retention bonus payable to an executive violated Section 409A of the Internal Revenue Code ("409A"). The IRS further ruled that the...more

IRS Chief Counsel Memorandum Clarifies that Correction of Section 409A Failures in Year of Vesting Will Not Shield Income...

Earlier this month, the Office of Chief Counsel of the Internal Revenue Service released a Memorandum clarifying the impact of a correction of a Code Section 409A operational failure before the date of vesting of nonqualified...more

The Importance of Fixing Section 409A Compliance Failures Sooner Rather Than Later

A recent Memorandum issued by the Office of Chief Counsel within the Internal Revenue Service demonstrates yet again the perils of failing to comply with Section 409A of the Internal Revenue Code. The Memorandum takes the...more

Companies Should Monitor Deferred Compensation Arrangements For Section 409A Compliance Purposes

Given the complexity of the rules under Section 409A of the Internal Revenue Code, which govern the timing and taxation of payments made under non-qualified deferred compensation arrangements (NDCAs), companies are encouraged...more

IRS Pursues 409A Audits, Issues Ruling on Certain Options/SARs under 457A

IRS audits signal focus on Section 409A compliance; Revenue Ruling makes certain nonqualified options and stock appreciation rights more attractive for offshore entities. The IRS has begun its limited audit initiative...more

IRS Begins Section 409A Compliance Initiative

The Internal Revenue Service (IRS) is getting ready to ramp up enforcement of Section 409A of the Internal Revenue Code. The federal agency recently announced the launch of a new project to assess the level of taxpayer...more

IRS Issues Revenue Ruling on Applicability of Section 457A to Options and Stock Appreciation Rights

On June 10, 2014, the IRS issued Revenue Ruling 2014-18, which holds that nonqualified stock options, as well as stock-settled stock appreciation rights (SARs), do not constitute nonqualified deferred compensation subject to...more

IRS Announces Section 409A Compliance Initiative Project

Executive Summary: At the American Bar Association Section of Taxation 2014 May Meeting, an IRS official announced that the IRS has created a compliance initiative project (CIP) for Section 409A of the Internal Revenue Code...more

IRS Announces New Program to Audit Section 409A Compliance

Internal Revenue Code Section 409A (Section 409A) governs the federal income tax treatment of non-qualified deferred compensation and retirement plans and arrangements. Employer noncompliance in both documentation and...more

IRS Begins Audit of Deferred Compensation Plans Subject to Section 409A

The IRS announced at recent bar association meeting that it is commencing a formal compliance initiative program (CIP) of selected employers and their deferred compensation arrangements that are subject to Section 409A of the...more

"Executive Compensation and Benefits Alert: IRS Section 409A Audit Initiative May Signal Increased Enforcement Activity"

Since the adoption of Section 409A of the Internal Revenue Code, employers and practitioners have wondered when and how the IRS would enforce it. With the recent IRS announcement of an audit initiative with respect to Section...more

IRS Begins 409A Audit Initiative

IRS representatives have recently announced that the IRS has begun a compliance initiative project to check compliance with section 409A of the Internal Revenue Code (“409A”). ...more

Survey of Current Benefits Issues

In This Presentation: - Affordable Care Act - Affordable Care Act: Fees and Taxes 2015 – Employer Shared Responsibility Fee - Forms for Reporting Fees - Retirement Plan Errors - Overview - Retirement Plan...more

Escaping the Clutches of 409A

Employers often use non-qualified deferred compensation (“NQDC”) arrangements to motivate or reward executive and management employees. These NQDC arrangements, if properly structured, enable key employees to defer income...more

IRS Issues Final Regulations on Property Transferred for Services Under Section 83

The Treasury Department (Treasury) and Internal Revenue Service (IRS) have issued final regulations clarifying the forfeiture provisions under Section 83 of the Internal Revenue Code of 1986, as amended, for transactions...more

Compensation Clawbacks and Code Section 409A Acceleration

When the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) became law in 2010, it included a requirement for public companies to recoup, or “clawback,” incentive compensation from executives in the event...more

The “Relocation Costs” Reimbursement Arrangement: A Section 409A Trap for the Unwary.

When an employer requires an employee to move his or her primary residence to work, or continue working, for the employer, oftentimes the employer, as an inducement for the employee to accept the offer employment or continue...more

2013 End of Year Plan Sponsor “To Do” List Part 1 – Executive Compensation

As 2013 comes to an end, we are pleased to present you with our traditional End of Year Plan Sponsor “To Do” Lists. This year we are presenting our “To Do” Lists in three separate Employee Benefits Updates. Part one of the...more

The ERISA Litigation Newsletter; November 2013

In This Issue: - Labor and Employment and ERISA Class Actions After Wal-Mart and Comcast — Practice Points for Defendants (Part I – Commonality)* - Agencies Release Guidance on HRAs, FSAs, and Employer Payment...more

California Reduces Section 409A Tax Penalty from 20% to 5%

Section 409A of the Internal Revenue Code of 1986, as amended (“Federal Section 409A”), imposes strict administrative and operational requirements on non-qualified deferred compensation arrangements, such as supplemental...more

Sutardja v. The United States: The Federal Claims Court Applies Code Section 409A to Discontinued Stock Options

Earlier this year, the U.S. Court of Federal Claims addressed the application of Section 409A of the Internal Revenue Code ("409A") to discounted stock options in Sutardja v. The United States. As expected, the court...more

California Enacts 409A Legislation Reducing State Tax Penalty

California Governor Jerry Brown signed into law AB1173 on Oct. 4, 2013, reducing the California 409A tax penalty from 20% to 5% for taxable years beginning January 1, 2013. The bill, a victory for California businesses and...more

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