Mastering New Section 409A and 457(f) Deferred Compensation Rules: Calculating and Reporting Includible Amounts

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, August 23, 2016

Recorded event now available

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Program Materials

This webinar will provide a comprehensive and practical guide to determining and reporting includible amounts from nonqualified deferred compensation plans under Sections 409A and 457(f). The panel will discuss the new IRS guidance on both sections, and offer complete and practical tools for identifying income that must be recognized and included as currently taxable income.

Description

Tax advisers serving clients who have deferred compensation under a nonqualified deferred comp plan must be aware of the income inclusion rules under Section 409A and its counterpart for exempt organization employees, Section 457(f). IRS rules on deferrals from nonqualified plans require taxpayers to include in taxable income any compensation amounts deferred when a “triggering event” creates a lapse in the "substantial risk of forfeiture (SROF)” of the deferred compensation.

In June, 2016 the IRS issued proposed separate sets of proposed regulations for Sections 409A and 457(f).  Both proposed regulations intend to clarify the SROF rules; however, the new rules governing Section 457(f) differ from the 409A regs, specifically in the treatment of non-compete clauses and short-term deferrals. Tax advisers should be aware of the new standards to avoid costly tax mistakes due to failure to include reportable amounts.

The IRS initiated a "compliance initiative project" to check compliance with Section 409A and 457(f) rules in 2014, and the new regulations signal that the IRS will continue its scrutiny of deferred compensation under nonqualified plans. Since the penalties for noncompliance are steep, and the regulations mandate disclosures from both employers and employee/service providers, tax advisers need to be fully aware of the operations and reporting requirements of 409A and 457(f) deferred amounts to avoid costly tax consequences.

Listen as our experienced panel provides a thorough and practical guide to the current rules governing 409A and 457(f) deferrals.

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Outline

  1. Overview of Section 409A and 457(f)
  2. Identifying Recognition-triggering events
  3. New IRS guidance issued in REG-123854-12 for Section 409A Plans
  4. New guidance for 457(f) plan deferrals and deviations from 409A treatment
  5. Arrangements not treated as deferred compensation under Section 457(f)
  6. Planning considerations for taxpayers with 409A plans

Benefits

The panel will discuss these and other important issues:

  • What events constitute a lapse in "substantial risk of forfeiture" (SROF) that qualify as a triggering event, such that a taxpayer must include the deferred amount in current year taxable income, under both a 409A and a 457(f) plan?
  • How are stock rights impacted by Section 409A requirements?
  • New proposed rules in REG-123854-12
  • What are the reporting responsibilities for employers and employees on 409A deferred amounts?
  • How do the new proposed regulations under 457(f) treat non-compete clauses differently in determining SROF?
  • Required calculations when compensation deferred under a nonqualified plan becomes includible due to a lapse in SROF

Faculty

Alexander Clark
Alexander Clark

Partner
Norton Rose Fulbright US

Mr. Clark practices in areas of employee benefits and tax. He represents and counsels clients on a range of...  |  Read More

Salkin, Barry
Barry L. Salkin

Of Counsel
The Wagner Law Group

Mr. Salkin is an employee benefits attorney focusing on diversified employee benefits, compensation, ERISA,...  |  Read More

Allison Hoeinghaus
Allison Hoeinghaus

Senior Director
Alvarez & Marsal Taxand

Ms. Hoeinghaus provides tax advice to corporate clients for executive compensation matters, including issues related to...  |  Read More

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