Transcription of Section 409A and Severance Arrangements
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Section 409A and Severance Arrangements
1 Alan M. Levine Section 409A and Severance Arrangements A Lexis Practice Advisor Practice Note by Alan M. Levine, Morrison Cohen LLP This practice note discusses how the nonqualified deferred compensation (NQDC) rules of 409A and its implementing regulations ( Section 409A) apply to Severance Arrangements . Section 409A governs the federal tax treatment of a wide variety of NQDC Arrangements , which are generally defined as any legally-binding compensation arrangement where payment is or can be made in a taxable year after the taxable year in which the arrangement is created. Section 409A s strict rules limit distributions to six permissible payment events, including a separation from service, which is described in this practice note.
using Code Z for noncompliant deferred compensation), and withhold on such amounts at the supplemental wage rate. I.R.S. Notice 2008-113, 2008-2 C.B. 1367. Separation from Service under Section 409A In the context of severance arrangements, the most common permissible payment event is a separation from service.
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