Client Alert

The Final Word Under the New Section 409A Rules: Separation Pay

May 08, 2007

Stephen Harris, Eric Keller, Ethan Lipsig and Mark Poerio

The recently released final Section 409A Treasury Regulations (Final Regulations) have brought clarity and relief with respect to the exemptions available for plans, programs and agreements that provide for separation pay and expense reimbursement.  If not exempt from Internal Revenue Code Section 409A (Section 409A), based on one of the exclusions described in this Client Alert or the short-term deferral rule (described in our April 30, 2007 Client Alert on Section 409A coverage), a separation pay plan generally will need to comply with Section 409A’s deferral election and payment requirements (including the six-month delay for specified employees of publicly traded companies), which will be discussed in our upcoming client alert focused on distribution rules.

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