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Taxes : Section 409A Rules
Articles
The Basics Of Nonqualified Deferred Compensation (Part 3): What You Need To Know About Section 409A To Avoid IRS Penalties
by Michael G. Goldstein

For your nonqualified deferred compensation to be an effective form of saving and investing, you and your company’s NQDC plan must comply with Section 409A of the Internal Revenue Code (referred to below as 409A). Failure to meet these requirements will lead to immediate taxation plus heavy penalties. This article delves into the details of 409A that you need to know.

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More Articles:
Beware Of Traps In Employment Agreements Under Section 409A
What Participants Need To Know About Section 409A (Part 1)
What Participants Need To Know About Section 409A (Part 2)
Foreign Executives Moving To The United States To Work: What To Know About Your Company’s Nonqualified Deferred Compensation Plan
FAQs
Is changing the investment choices in my NQDC account allowed by Section 409A?

As long as you do not alter the timing or form…

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After I stop working for my company, can I continue to consult or perform any services for it without causing problems related to my NQDC distributions?

This depends on how many hours of work you continue to perform. Those pesky Section 409A rules are very specific about when distributions are allowed under your NQDC plan and what constitutes a termination of employment. The final regulations lengthily discuss…

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More FAQs:
UPDATES! Can certain life events accelerate distributions, such job loss, disability, an unforeseeable emergency, or death?
How do I change the timing or form of my distribution?
If my company pays my bonus just a few months after the end of the year, is that nonqualified deferred compensation? Is there a grace period or short-term exception so that it is not penalized?
What appears on my W-2 if my plan has violated Section 409A?
Can I protect myself from tax penalties through provisions in my NQDC agreement or employment agreement?
UPDATES! Can I (or my company) fix a tax mistake I made in deferring my income or in the distribution without being penalized?
UPDATES! Is the IRS starting to scrutinize companies’ NQDC arrangements in search of compliance problems with 409A?
UPDATES! What are the penalties if my NQDC plan violates Section 409A?
UPDATES! What is this Section 409A I keep hearing about?
If my NQDC plan is linked in some way to my tax-qualified plans, does the tax-qualified plan need to follow the Section 409A rules?
UPDATES! Can my severance payments be affected by the rules on nonqualified deferred compensation?
As a director, can I elect to take part of my retainer as deferred stock units?
Can my company convert restricted stock into some type of nonqualified deferred compensation, such as RSUs?
Is there a difference between triggering a distribution and accelerating it?
Are severance payouts subject to the same six-month delay as other NQDC payments?
UPDATES! What restrictions affect when I can receive NQDC distributions and what I can elect? What can trigger an early payout?
How did the IRS modify the Section 409A regulations in 2016?
NEW! Can I forfeit or modify my NQDC plan benefits?
Quiz
NQDC Taxation
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Podcasts
NQDC Taxes Part 1
NQDC Taxes Part 2

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