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Impact of Internal Revenue Code Section 409A on Severance Benefits

August 16, 2005

By Ethan Lipsig, Mark Poerio, Eric R. Keller and Stephen H. Harris

In the fall of 2004, Congress enacted IRC Section 409A. This deceptively simple section revolutionizes nonqualified deferred compensation, principally by establishing deadlines by which deferral elections must be made and by regulating distribution practices. However, Section 409A applies to a great deal more than just nonqualified deferred compensation plans.