Posts Categorized: Section 409A

Senate Version of Tax Reform Proposes Compensation and Retirement Plan Changes

in Retirement Plans, Section 409A, Tax Issues

By:  Mark Stember and Todd Castleton On November 10, 2017, the Senate released a document entitled “Description of the Chairman’s Mark of the ‘Tax Cuts and Jobs Act’” prepared by the Joint Committee on Tax summarizing the proposals expected to appear in the Senate tax reform bill scheduled for mark up today, November 13, 2017.  The description provides background and summaries of the proposed tax code changes expected to appear in the legislation, although the text of the bill has not been released as of Monday morning. Compensation Issues The description reflects that both the Code Section 162(m) change and… Continue Reading

House Ways and Means Committee Says, “Never Mind” to Repeal and Replace of Code Section 409A

in Executive Compensation, Section 409A, Tax Issues

By: Todd Castleton One week ago the Republicans’ Tax Bill H.R. 1, the “Tax Relief and Jobs Act,” was released. Section 3801 of that bill proposed to significantly curtail deferred compensation arrangements by replacing Internal Revenue Code section 409A with section 409B for all services performed on or after January 1, 2018. It would have also required all deferred compensation deferred before 2018 under current section 409A to be included in income no later than 2025. On November 9, 2017, House Ways and Means Committee Chairman Kevin Brady released an amendment striking these proposed changes. According to the summary released… Continue Reading

Tax Bill Compensation Changes – A Cause for Concern

in Executive Compensation, Section 409A, Tax Issues

The tax bill issued yesterday contains a number of provisions that, if implemented, will result in dramatic changes to the taxation of certain compensation arrangements.  Of particular concern: The performance-based compensation exception to the section 162(m) $1 million compensation deduction limitation would be eliminated, and the CFO would be added to the group of executives that are subject to the 162(m) limitation. Employer stock options would be treated as deferred compensation and taxable at vesting. Section 409A would be repealed and replaced by Section 409B, which generally would provide for taxation of deferred compensation at vesting, generally effective for deferred… Continue Reading

IRS Issues Proposed Regulations under Sections 457(f) and 409A

in Executive Compensation, Section 409A, Tax Exempt Entities, Tax Issues

On June 22, 2016, the IRS issued long-awaited proposed regulations on Section 457(f) plans, as well as additional proposed regulations under Section 409A.  As expected, the Section 457(f) rules have many similarities to the existing Section 409A rules; however, there are some welcome differences including the possibility of a noncompete agreement creating a substantial risk of forfeiture for purposes of Section 457(f).  While the proposed rules under Section 409A include several welcome clarifications, changes to the proposed income inclusion regulations narrow the ability to make changes to unvested benefits.