Section 409A of the Internal Revenue Code of 1986, as amended (409A), was enacted into law in 2004 to impose statutory requirements on “nonqualified deferred compensation plans, programs or arrangements” (collectively referred to herein as a “plan” or “plans”). In general, 409A requires all nonqualified deferred compensation plans to specify in writing, upon the inception of the plan, the “time” and “form” of payment, and, except in limited circumstances, it prohibits the acceleration or subsequent deferrals after a plan has been established.
In “409A Issues in Executive Compensation Contracts and Employment Agreements,” Manatt discusses that the difficulty with 409A is its overly broad definition of what constitutes a nonqualified deferred compensation plan. The article provides a summary of the more common 409A issues that arise when drafting and negotiating executive compensation contracts and employment agreements.
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