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 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.

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News & Analysis as of May 25, 2013

A Cautionary Tale Under Code § 409A: Case Evidences IRS' Willingness To Seek 409A Penalties For Discount Options

by Janet Lowder | Womble Carlyle Sandridge & Rice, PLLC on 4/22/2013

The United States Court of Federal Claims recently issued an opinion confirming that § 409A of the Internal Revenue Code of 1986 applies in the context of discount stock options. The case, Sutardja v. United States, is one of...more

Court Of Federal Claims Upholds 409A "Gotcha"

by Kevin Wiggins | Saul Ewing LLP on 4/10/2013

If your company has been cavalier about Internal Revenue Code Section 409A, you should reconsider. In a recent opinion by the United States Court of Federal Claims, the IRS scored the first points – more than $5 million of...more

Court Affirms Discounted Stock Options Are Deferred Compensation Subject to Section 409A

by Mary Hevener, Daniel Hogans, Eric P. Sarabia | Morgan Lewis on 3/21/2013

Court of Federal Claims agrees with the IRS position that section 409A applies to discounted stock options; holding is important for compensatory stock option grants. On February 27, the U.S. Court of Federal Claims...more

More On Discounted Stock Options Under Section 409A

by Angela Bohmann | Leonard, Street and Deinard - Employee... on 3/12/2013

My colleague Jeff Cairns blogged about a recent court case confirming the IRS’s position that discounted stock options can be considered noncompliant nonqualified deferred compensation arrangements under Section 409A of the...more

Section 409A Tax Assessed An Discounted Stock Options – Taxpayer Sues For Refund In Federal Court Of Claims

by Jeffrey P. Cairns | Leonard, Street and Deinard - Employee... on 3/8/2013

Code Section 409A which was effective in January 1, 2005, provides strict rules that must be applied to most deferred compensation arrangements accruing benefits after the effective date. Failure to comply with the Code and...more

California Doubling Of 20% Federal Tax Increase Under IRC Section 409A

by Marla Aspinwall | Loeb & Loeb LLP on 2/28/2013

Originally published in State Bar of California Taxation Section 2013 Sacramento Delegation in February 0f 2013. Executive Summary - Under Internal Revenue Code Section 409A (“Section 409A”), all amounts deferred...more

Perspectives - Fall 2012 | Volume 3, Edition 2: An Executive Compensation, Benefits & Human Resources Law Update

by Bradley A. Benedict, Ana N. Damonte, Sarah A. Good, Peter J. Hunt, Mark Jones, Scott E. Landau, Cindy V. Schlaefer | Pillsbury Winthrop Shaw Pittman LLP on 12/13/2012

In This Edition: - Year-end Deadline for Correcting Section 409A Deferred Compensation Arrangements That Condition Payment on an Employee Release or Covenant: By December 31, 2012, all deferred compensation...more

Year-End Deadline Approaching for Code Section 409A Corrections

by Duane Morris LLP on 11/30/2012

Employers should be aware that December 31, 2012, is the Internal Revenue Service's (IRS) deadline for correcting certain documentary violations under Internal Revenue Code Section 409A ("Section 409A"). Specifically,...more

Expiration of 409A Correction Period Regarding the Timing Requirement to Execute a Release Agreement

by John J. Heber | Manatt, Phelps & Phillips, LLP on 11/30/2012

The payment of severance in the event of a termination of employment is often conditioned on the execution of a release agreement. This requirement may violate the documentary requirements of Code Section 409A ("409A") if the...more

409A Update: Employment Agreements Requiring Executed Releases May Need to Be Amended by December 31

by Randall I. Cherkas, Michael J. Crumbock | Pepper Hamilton LLP on 11/26/2012

It is standard practice that employment agreements condition payment of severance benefits or other separation compensation on the employee executing a general release of claims against the employer. However, unless...more

Deadline Approaching for Section 409A Year-End Correction

by Beth Alcalde, Ian L. Minkin, Leanne Reagan, Peter E. Salomon | Akerman Senterfitt on 11/26/2012

Section 409A Year-End Correction Deadline: Compensation arrangements such as employment or severance agreements, that provide for payments that are contingent on the execution of a release, must be brought into compliance...more

"Executive Compensation and Benefits Alert: Strategies for Accelerating Income Into 2012"

by Stuart N. Alperin, Neil M. Leff, Regina Olshan, Erica Schohn, Joseph M. Yaffe | Skadden, Arps, Slate, Meagher & Flom LLP on 11/26/2012

Tax rates for highly compensated individuals will increase in 2013, perhaps substantially. This is due in part to: - Possible expiration in 2013 of the Bush tax cuts, resulting in increases in the highest marginal tax...more

A Guide to Employee Benefits Administration and Leaves of Absence

by Joni L. Andrioff, Michelle Barrett, Michael G. Congiu, Steven J. Friedman, Susan Katz Hoffman, Diane L. Kimberlin, Adam J. Peters, Michelle P. Thomas, George R. Wood | Littler on 11/26/2012

Laws Providing Leaves of Absence - Family and Medical Leave Act (FMLA) - The FMLA, as relevant here, requires covered employers to provide eligible employees up to 12 weeks of unpaid leave due to a serious...more

Employment Contracts and Severance Agreements Should be Reviewed and May Need to be Amended by December 31 to Comply with Section...

by Dan S. Brandenburg, Joanne G. Jacobson | Saul Ewing LLP on 11/20/2012

Severance agreements and employment contracts with release of claims provisions may violate 409A of the Internal Revenue Code. Bad release provisions may be fixed, penalty-free, before December 31, 2012. Most severance...more

Relief for Correcting Certain Internal Revenue Code Section 409A Failures Expires This Year

by Proskauer Rose LLP on 11/16/2012

The Treasury Department and the IRS have provided favorable transition relief for correcting arrangements that impermissibly condition the payment of nonqualified deferred compensation on a service provider's completion of...more

Section 409A Transition Relief Deadline Quickly Approaching

by Christopher K. Buch, Daniel B. Lange | Katten Muchin Rosenman LLP on 11/14/2012

As the end of the year approaches, important transition relief from penalties and excise taxes imposed by Section 409A of the Internal Revenue Code (the Code) is about to expire. If an employer has an employment agreement or...more

Benefits Update, No. 4, November 2012: Deadline to Correct 409A-Covered Documents Involving Employee Releases Is December 31, 2012

by Callan G. Carter | Fisher & Phillips LLP on 11/13/2012

Internal Revenue Code Section 409A governs deferred compensation, which includes, with some exceptions, practically all agreements or plans in which an agreement is made in one year to pay an amount in a later year. Its most...more

Year-end Deadline for Correcting Section 409A Deferred Compensation Arrangements Conditioned on Employee Release or Covenant

by Peter J. Hunt | Pillsbury Winthrop Shaw Pittman LLP on 11/12/2012

By December 31, 2012, all deferred compensation arrangements in which payment is contingent on employee action, such as execution of a release of claims, must either include payment-timing restrictions that comport to IRS...more

McAfee & Taft EmployerLINC Employee Benefits Law Alert: Year-end IRS deadline looms for correcting release language in 409A...

by McAfee & Taft on 11/9/2012

Employers with employment agreements, severance policies, and other non-qualified deferred compensation agreements that contain language conditioning any payment on employee action, such as the execution of a release of...more

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