Chief Counsel Memorandum Clarifies IRS Position on Informal 409A Corrections

On May 1, the IRS released a Chief Counsel Memorandum that clarifies the IRS’ position with respect to the correction of deferred compensation arrangements outside of the IRS’ formal Section 409A correction programs.

In the Memorandum the IRS analyzed a retention bonus that was granted in year 1, vested in year 3, and to the extent vested, would be paid in equal installments in years 4 and 5. The retention agreement contained a provision that gave the employer the discretion to accelerate and pay the retention bonus in a single lump sum payment in year 4.  As noted by the IRS, the employer’s discretion to accelerate and pay the retention bonus early violated Section 409A’s prohibition against acceleration.  Read More ›

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