October 12, 2015
As the calendar year winds down, reviewing Compensation Arrangements related to unvested rights is a timely move. In an online article published last week by JD Supra and written by Kimberley Anderson, Jamison Klang, and Marianne O’Bara of Dorsey & Whitney LLP, the authors point out that as the end of the year approaches, correction of errors could save costly 409A penalties.
The article looks at several common provisions that make an arrangement subject to Section 409A review that should be considered in advance of the year-end. As a reminder of the timeline and possible penalties, the writers point out:
If the document failure is found now, it can be corrected on or before December 31, 2015, and if no change-of-control occurs before December 31, 2015, the correction will not entail a penalty or additional tax. This correction relies on the 409A “income inclusion regulations” that assess penalty taxes based on vested amounts on a year-by-year basis.”