If IRC Section 409A had an official day on the calendar it would be every October 22nd.
Seventeen years ago, on October 22, President George W. Bush signed the American Jobs Creation Act of 2004. With this executive action, the terms and requirements of nonqualified deferred compensation arrangements became better defined, more regulated, and in many ways, more user friendly.
Before IRC Section 409A was added to the U.S. tax code in 2004, nonqualified deferred compensation arrangements were more loosely regulated. As a result, companies such as Enron made headlines when, on the brink of collapse, executives drew their deferred compensation in advance of the corporate bankruptcy they knew was inevitably coming. Although this action was legal at the time, its ethics were certainly questionable, and paved the way for the enactment of IRC Section 409A.
IRC Section 409A improved deferred comp by better defining it
Good fences make good neighbors, and with the 2004 regulations on deferred compensation plans, organizations and their executive compensation consultants have since been well positioned to design plans that effectively and ethically serve both executives and the objectives of the organization.
Although you may not find IRC Section 409A Day ‘officially’ on your calendar, perhaps it should be. And what better day than today, October 22, to celebrate it? It’s also well worth noting, and appropriate that all month long, October is (officially) National Retirement Security Month, a month-long effort to raise public awareness of the importance of financial wellness and saving for retirement security.
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