Now Is a Good Time to Revisit 409A Compliance

Greg Gautam • June 2, 2014

The IRS recently announced a Section 409A compliance initiative project.  The IRS audit project will focus on approximately 50 employers, all of whom were previously identified for employment tax audits.  The IRS indicated that it will focus its examination on: (i) initial deferral elections; (ii) subsequent deferral elections; (iii) distributions; and (iv) application of the six-month delay rule for specified employees of publicly traded companies.  Representatives from the IRS said that the examination will be limited to the top 10 most highly compensated employees of each employer.

If you are not participating in the compliance initiative project, now might be a good time to review your “nonqualified deferred compensation” arrangements for compliance with Section 409A.  As a reminder, the following types of arrangements often fall within the scope of Section 409A:

  • Deferred compensation plans (such as salary and bonus deferral programs)
  • Supplemental retirement plans.
  • Severance plans.
  • Annual or multi-year incentive bonus arrangements.
  • Employment agreements that provide for severance, change in control or other future contingent payments.
  • Discounted stock options and certain stock appreciation rights.
  • Change in control agreements.
  • Phantom stock plans.
  • Restricted stock unit agreements.

If an arrangement violates Section 409A, the employee is required to include in income all vested amounts deferred or subject to the arrangement (regardless of whether the employee is entitled to receive a payment in that year). In addition, the employee must pay an additional 20% tax (over and above the regular federal income tax already owed) and interest penalties. These penalties apply not only to the arrangement that violates Section 409A, but also to any other similar arrangement between the employer and the same employee.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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