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Last Chance for Complying with Section 409A: Year-End Checklist

December 19, 2008

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

Now is truly the last chance for getting employment agreements, severance programs and expense reimbursement arrangements into compliance with Internal Revenue Code (Code) Section 409A. December 31st also is the end of a transition period for changing payment schedules for benefits payable under these and other arrangements that are subject to Section 409A (NQDC). If compliance does not occur by December 31st, individuals will be subject to accelerated taxation, interest penalties, and a 20% excise tax on their noncompliant NQDC benefits and any compliant NQDC benefits under plans of the same type.

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Image: Eric R Keller
Eric R Keller
Partner, Tax Department