IRS Issues Proposed Regulations On Nonqualified Deferred Compensation Under Section 409A

The IRS recently issued proposed regulations under Section 409A that apply to nonqualified deferred compensation. These proposed regulations include certain changes to the final regulations issued in 2007 and address how to calculate amounts includable in income under Section 409A.

Among the proposed changes are the following:

• Modify the short-term deferral rules to allow a delay in payments to avoid violating federal securities or other laws
• Clarify that stock options and stock appreciation rights will not be subject to Section 409A merely because the amount payable under the option or appreciation right upon an involuntary termination of employment for cause, or the occurrence of a condition within the employee's control, is based on a measure that is less than fair market value