Why is it Important under Code § 409A to Review Executive Employment Agreements by December 31, 2012?

Friday, October 26, 2012 

Separation or change of control agreements that condition payment to an executive on the execution of a release should be reviewed before the end of 2012. Why? Two reasons:  First, if the agreement allows the executive to delay payment by delaying the execution of the release, the IRS says it may not comply with Code section 409A. Noncompliance results in a 20% tax penalty on the executive; andSecond, because if there is a problem and if it is corrected by December 31, 2012, both the company and the executive are relieved of having to report the correction to the IRS.

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