Employee Severance Agreements and Section 409A Deferred Compensation: Withstanding Heightened IRS Scrutiny

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Tuesday, February 11, 2020

Recorded event now available

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Program Materials

The CLE webinar will provide counsel with guidance on structuring employee severance or separation agreements to comply with Section 409A's restrictions on deferred compensation. The panel will discuss best practices for performing compliance self-audits and taking corrective action to remedy substantive or documentary failures.

Description

The IRS pursues Section 409A audits initiative aimed at determining companies' compliance with 409A's restrictions on the deferral of compensation. The agency focuses on compliance with initial deferral election requirements, subsequent deferral election requirements, and distributions of deferred compensation, including the six-month delay rule.

Most severance arrangements fit within the purview of Section 409A and must be structured appropriately to avoid the adverse consequences imposed by Section 409A.

Specifically, failure to comply with 409A's strict rules can result in severe penalties, including a 20% excise tax and immediate taxes on vested deferred amounts. The IRS recently ruled that an executive was required to recognize income under 409A--subject to the 20% penalty--because a plan document error was corrected in the vesting year even though it was before vesting occurred.

Listen as our experienced panel of employee benefits attorneys explains the critical requirements of 409A and discusses the steps companies should take to ensure compliance. The panel will outline best practices for reviewing nonqualified deferred compensation plans, employment agreements, and other severance arrangements.

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Outline

  1. 409A issues to be considered in severance plans and agreements
  2. Severance benefits subject to 409A
  3. Severance benefits exempt from 409A
  4. Impact of accelerating the vesting of equity awards upon the termination of employment on 409A
  5. Discussion of change in control severance arrangements and "regular" severance for purposes of 409A
  6. Importance of the definition of "good reason" for 409A purposes
  7. Can severance benefits that are subject to 409A be conditioned on a release?

Benefits

Our panel will discuss these and other key issues:

  • Does 409A impact all severance plans and agreements?
  • How does 409A impact the drafting of severance plans and agreements?
  • What are some best practices for complying with 409A regulations as they relate to severance plans and agreements?

Faculty

Bergmann, Michael
Michael R. Bergmann

Counsel
Skadden, Arps, Slate, Meagher & Flom

Mr. Bergmann counsels clients on employee benefits, ERISA and executive compensation matters. A significant portion of...  |  Read More

Fogleman, William
William Fogleman

Attorney
Groom Law Group

Mr. Fogleman assists clients with qualified retirement plans, nonqualified deferred compensation plans, equity and...  |  Read More

Fosse, J. Marc
J. Marc Fosse

Director
Trucker Huss

Mr. Fosse focuses on all the tax, securities, corporate and accounting issues related to executive and equity...  |  Read More

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