"The Enron scandal featured elaborate deferred compensation plans to provide executives a gilded liferaft when the ship sinks. Congress responds with a code section affecting schoolteachers. They showed Ken Lay what for by designing a tax on folks on money they may never see because of somebody else’s foot fault.
Sec. 409A clobbers its victims two ways:
• It taxes employees on their deferred comp balances when the plan is out of compliance, even if the employee doesn’t get the money, ever.
• It hits them again with a 20% excise tax.
Worse, the code section imposing these penalties is so complicated that it took 3 years to complete the regulations that run to 200 pages, and are so complicated and intrusive that accidental noncompliance must be rampant.
This all makes Sec. 409A my choice as the worst tax enactment of the decade."
Article by Joe Kristan of "Going Concern"