Treasury and IRS Issue Proposed Regulations under Section 409A — Severance Pay, Performance-Based Compensation and Distributions

As we reported in two previous LawFlashes, Treasury and the IRS recently issued proposed regulations under section 409A of the Internal Revenue Code, as amended (the Code), which provide guidance on nonqualified deferred compensation arrangements. Our first LawFlash enumerated actions that plan sponsors and participants need to take before December 31, 2005. Our second LawFlash discussed implications of the proposed regulations on equity compensation arrangements. This third LawFlash highlights the rules with respect to severance pay, performance-based compensation, 401(k) wrap plans and other deferred compensation plans tied to a qualified plan, distributions, and termination of nonqualified deferred compensation plans.

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