Section 409A › Severance Agreements

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 26, 2013

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

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

409A Transition Relief Ends December 31 for Certain Severance and Other Employment Agreements

by King & Spalding on 10/31/2012

Employment, change in control, and severance agreements, as well as severance and deferred compensation plans, often condition payment upon the execution of a release or a noncompete or other employment-related condition. Any...more

Deadline Approaching for Amending Compensation Arrangements to Comply with Internal Revenue Code Section 409A

by Miller & Martin PLLC on 10/26/2012

Employers with employment, severance or other compensation arrangements with their employees should be aware the IRS has taken the position agreements that provide for payments, such as severance payments, that will be made...more

Opportunity to Amend Certain Severance-Related Release Agreements to Comply with Section 409A Expires at Year End

by Loeb & Loeb LLP on 10/26/2012

Companies commonly condition the payment of severance benefits upon the terminated individual's execution of an agreement containing a release of claims against the employer. Many release provisions permit a former employee...more

Section 409A Document Correction Relief: Take the Final Bite of the Apple before December 31st

by Mintz Levin - Employment, Labor & Benefits on 10/24/2012

Background - Section 409A of the Internal Revenue Code (Section 409A) regulates the payment of non-qualified deferred compensation. If a plan or agreement is not otherwise exempt from Section 409A and does not comply with its...more

December 31 Section 409A Correction Deadline for Severance Pay Approaching

by Benjamin I. Delancy, Ann Carr Mackey | Ogletree, Deakins, Nash, Smoak & Stewart,... on 10/17/2012

The Internal Revenue Service(IRS) has given employers until December 31, 2012 to correct a problem frequently found in severance agreements and other similar arrangements. If the problem is not addressed by that date, then it...more

Time is Running Out! December 31 Deadline Nears for Documentary Correction of Payments Contingent on the Execution of a Release...

by Littler on 10/17/2012

Severance and other deferred compensation payments that are contingent on the execution of a release can in some circumstances result in a violation of Section 409A of the Internal Revenue Code. Section 409A governs the...more

IRS Penalty Relief For Severance Pay Expires On December 31

by Benjamin I. Delancy, Ann Carr Mackey | Ogletree, Deakins, Nash, Smoak & Stewart,... on 10/17/2012

The IRS has given employers until December 31, 2012 to correct a problem frequently found in severance agreements and other similar arrangements. If not corrected by that date, it could be much more expensive to correct the...more

December 31, 2012 Deadline to Correct Certain Section 409A Payment Timing Errors

by Reed Smith on 10/12/2012

December 31, 2012, is the deadline for correcting certain errors in the written provisions of nonqualified deferred compensation arrangements that provide payments that are contingent on the recipient’s execution of a release...more

Review Compensation Arrangements by Year End to Determine if Amendments Are Needed to Comply with Code Section 409A

by Perkins Coie on 10/12/2012

In early 2010, the IRS surprised the benefits community by stating in Notice 2010-6 that deferred compensation arrangements that condition payment on employee action (such as the execution of a release, noncompetition...more

Dec. 31 Deadline for Severance Pay Provisions in Employment Agreements to Comply With Section 409A

by Davis Wright Tremaine LLP on 10/11/2012

Many employment agreements, especially those for high-level executives, provide severance pay upon a change in control or a termination without cause, but only if the employee signs a release of claims. The IRS has noted that...more

Executive Compensation Alert: Relief Period for Section 409A Release Timing Errors Expires on December 31, 2012 Action Needed

by Fenwick & West LLP on 10/10/2012

Non-qualified deferred compensation arrangements that are not exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), should be reviewed to ensure compliance with Section 409A’s rules governing...more

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