Friday, December 9, 2011

IRS Will "Clean Up" 409A

Plans on using 457A regs to clean up 409A. Click Here.

According to Sherman & Patterson:

"A key IRS attor­ney said last week that the § 457(f) reg­u­la­tions will be used as a vehi­cle to do some § 409A “clean-up.” He also referred to the ini­tial guid­ance being pro­posed rules. These com­ments seem to indi­cate that the reg­u­la­tions are mov­ing for­ward, are broader than orig­i­nally thought, and have a bet­ter chance of receiv­ing ear­lier rather than later atten­tion. The indi­ca­tion that they will come out in pro­posed form is pos­i­tive news as it will not only give a chance for com­ment, but a longer period for eas­ing into the new rules."

Friday, June 17, 2011

New Regs on Deferred Comp for Non-Profits and Government

457(f) to be updated to in line with 409A

Mintz Levin Article HERE

Pillsbury Article HERE

Stockholder "Say On Pay" Initiatives Blocked by 409A

409A Wreaks New Havoc

"To illustrate the complexity of the interaction between Section 409A and corporate governance, let's say there's a negative say-on-pay vote against XYZ Corp. that appears to result, in part, from the CEO having accrued a $20 million vested SERP benefit. In order to convince shareholders that their concerns have been properly taken into account, the compensation committee negotiates a $5 million reduction to this SERP benefit with the CEO. This reduction, if implemented, would result from disregarding certain types of incentive pay that had counted as eligible compensation when calculating the SERP.

As a practical matter, XYZ's compensation committee intends to make larger annual equity compensation awards in future years based on the company meeting objective and challenging performance goals. The awards would allow the executive an opportunity to make up for the loss of the $5 million through future performance. It would seem that this type of negotiation and restructuring is what Congress had in mind when it enacted the say-on-pay provisions in Dodd-Frank.

Well, not so fast. The CEO could be stuck with a significant tax bill. As noted above, the SERP is nonqualified deferred compensation subject to Section 409A. So, if the later performance share awards are viewed as a substituted payment for the forfeited portion of the CEO's SERP, then there will be a Section 409A violation."

Article from CFO Magazine HERE

Friday, June 3, 2011

Start-Up America Says: 409A Stymies Access to Talent and Gain Sharing

The problem is that many regulations assume — or almost mandate — a traditional workaday paycheck relationship between company and labor. In particular, IRS tax code elements (e.g., contractor/employee tax rules and Section 409A deferred compensation) and SEC regulations (e.g., on secondary markets of shares in private companies and stock-option accounting rules) stymie the kind of flexible access to skilled talent and gain-sharing that high-growth companies need.

Article Here

Wednesday, May 11, 2011

Treasury Counsel Says No Re-Write of 409A Regs - But Willing to Help Taxpayers

"Treasury Department and Internal Revenue Service officials do not intend to rewrite regulations issued under tax code Section 409A but the agencies do want to hear about specific compliance problems that employers and practitioners have encountered, George Bostick, Treasury benefits tax counsel, said May 6."

click Here

Sunday, April 24, 2011

409A Nominated for Repeal under "Just Plain Dumb" Initiative

By Donald Kalfen on

"Imagine a day when the President of the United States tells federal regulators to conduct a government-wide review to “root out regulations that conflict, that are not worth the cost, or that are just plain dumb.” That day arrived on January 18, 2011. President Obama penned an op-ed piece appearing in the January 18th issue of The Wall Street Journal in which he announced the signing of an executive order directing regulators to toss in the trash bin ill-advised regulations of commerce...

...It is time to mark for extinction three well-known, often written about and little admired tax sections that have been wreaking havoc for some time – 162(m), 280G and 409A. The first two sections represent the misguided attempts by Congress to dictate the design of officer compensation through the heavy hand of the tax code. The last section represents a case of Congressional overreaching."


Wednesday, March 2, 2011

xtremErisa: Dividend Equivalent Rights and 409A

Discussion Here

"Dividend equivalent rights ("DERs") were specifically addressed in the 162(m) regulations regarding the question of whether the grant thereof in connection with an option grant disqualifies the option from favorable treatment as performance-based compensation. Not a whole lot of fuss was made about it at the time. Now we get DER II, set in 409A-Land, and, just when you thought it was safe to go back in the water (thanks, Jaws II), things get a little scary."

Tuesday, February 1, 2011

Hollywood Stars Hot Over 409A - Lobby for Change

Stars turn down cash advances - advances come to a "screeching halt;" stars turn away TV contracts; studios in a pinch; 409A "killed a mosquito with a cruise missile; "percentage of profits" or "points" is deferred compensation.

Article Here