IRC Section 409A/Nonqualified Deferred Compensation Consulting

Internal Revenue Code (“IRC” or “§”) Section 409A has been with us for a while now, but it continues to wreak havoc with employers, both large and small.  With over 400 pages of regulatory guidance and truly draconian penalties, it’s both extremely complex and penal. 

Most companies undertook efforts to ensure compliance by inventorying compensation programs that might trigger §409A and its penalties when the rules went into effect.  Nevertheless, we continue to encounter documentary, as well as, operational violations. 

There are limited opportunities to correct these violations under the voluntary correction procedures, but time is certainly of the essence in order to minimize penalties.    As such, it may be prudent to perform periodic reviews of your various compensation programs in order to identify any problems early on, which will maximize the correction alternatives and hopefully minimize the pain.

Of course, the best course of action is to ensure that all compensation arrangements are initially designed to comply with the complexities of §409A, while still effectively pursuing the company’s strategic objectives.  This can be as much art as science. 

We have lived and worked with §409A since it came into existence in 2004.  We are thoroughly familiar with both the letter and intent of the law.  We’ve seen virtually every form of document failure and procedural oversight, and we understand the subtleties inherent in the existing authority. 

While we have the skills and experience to ensure technical compliance, and our goal is always to help companies find the right solution for them.  So whether you’re undertaking a periodic review to mitigate tax compliance risk, or designing a new nonqualified deferred compensation plan to attract and retain the talented personnel needed to achieve company goals, we have both the skills and insight to help you succeed.