Notice 2009-92 provides that a delay or acceleration of the payment of nonqualified deferred compensation in order to comply with an advisory opinion issued by the Office of the Special Master for Troubled Asset Relief Program (TARP) Executive Compensation, pursuant to the Emergency Economic Stabilization Act of 2008 and regulations thereunder, including conditioning payment on satisfaction of a requirement related to TARP, such as repayment of the financial assistance granted under TARP, will not cause the plan to fail to meet the requirements of Section 409A.
Part III. Administrative, Procedural, and Miscellaneous Guidance on the Application in income immediately compensation may be delayed to a date after a designated of § 409A(a) to Changes otherwise deferred under the plan and payment date under certain circumstances, to Nonqualified Deferred pay taxes on such income, including an and that in these circumstances the appli- additional 20% tax and a tax generally cable plan provision will not fail to meet Compensation Plans to based upon the underpayment interest the requirements of establishing a permis- Comply with an Advisory that would have accrued had the amount sible payment event and the delay in the Opinion of the Office of the been includible in income when first de- payment will not constitute a subsequent Special Master for TARP ferred or, if later, vested. As provided deferral election, as long as the service re- Executive Compensation by § 409A(a)(1)(A)(i), a nonqualified de- cipient treats all payments to similarly sit- ferred compensation plan must comply uated service providers on a reasonably Notice 2009–92 with the requirements of § 409A(a) both consistent basis. Such circumstances in- in form and in operation. Section 409A(e) clude (i) the delay of payments subject to I. Introduction provides that the Secretary of the Treasury § 162(m) to the extent the service recip- (Secretary) shall prescribe such regula- ient reasonably anticipates that if the pay- This notice provides that, subject to cer- tions as may be necessary or appropriate ments were made as scheduled, the service tain conditions, the compliance by a fi- to carry out the purposes of § 409A. On recipient’s deduction with respect to such nancial institution (TARP recipient) that April 17, 2007, the Treasury Department payments would not be permitted due to has received financial assistance under the and the IRS issued final regulations under the application of § 162(m), (ii) the de- Troubled Asset Relief Program (TARP) § 409A that apply to taxable years begin- lay of payments to the extent the service with an advisory opinion of the Office ning on or after January 1, 2009 (72 Fed. recipient reasonably anticipates that mak- of the Special Master for TARP Execu- Reg. 19234). ing the payments will violate Federal se- tive Compensation (the Special Master) Section 409A(a)(4) provides certain curities laws or other applicable law, and determining that changing the time or form rules with respect to making an election (iii) such other events and conditions as the of payment of compensation to a service to defer compensation under a nonquali- Commissioner may prescribe in generally provider of the TARP recipient, or condi- fied deferred compensation plan. Section applicable guidance published in the Inter- tioning payment upon a TARP-related con- 409A(a)(4)(B)(i) provides generally that nal Revenue Bulletin. dition such as the prior repayment of some a plan may permit compensation for ser- Section 409A(a)(3) provides that, ex- or all of the financial assistance, or both, vices performed during a taxable year to cept as provided in regulations issued is necessary for the payment or arrange- be deferred at the participant’s election by the Secretary, a nonqualified deferred ment to be consistent with the standards set only if the election to defer such com- compensation plan may not permit the forth in Treasury’s Interim Final Rule for pensation is made not later than the close acceleration of the time or schedule of pay- TARP Compensation and Corporate Gov- of the preceding taxable year or at such ment of compensation deferred under the ernance (74 FR 28394), will not result in other time as is provided in regulations. plan. Section 1.409A–3(j) further provides a failure to comply with the requirements Section 409A(a)(4)(C) provides that a that a nonqualified deferred compensa- of § 409A(a) of the Internal Revenue Code nonqualified deferred compensation plan tion plan may not permit the acceleration (Code). This notice applies only to TARP that permits, under a subsequent election of the time or schedule of any payment, recipients and the service providers of such (a subsequent deferral election), a delay and no such accelerated payment may be TARP recipients and only to the extent that in a payment or a change in the form of made whether or not provided for under the compensation paid by the TARP recip- payment must require that (i) such elec- the terms of the plan, except pursuant to ient to a service provider of that TARP re- tion will not take effect until at least 12 one of the exceptions set forth under such cipient is addressed by an advisory opinion months after the date on which the elec- section. of the Special Master issued after Septem- tion is made, (ii) in the case of an election Under § 1.409A–1(b)(4), an amount ber 30, 2009. The Treasury Department related to a payment not made on account that constitutes a short-term deferral is not and the IRS intend to amend the regula- of disability, death or the occurrence of a deferral of compensation for purposes tions under § 409A to incorporate guid- an unforeseeable emergency, the payment of § 409A. Generally, an amount must ance set forth in this notice as necessary. governed by the election will be deferred be paid not later than the end of the ap- for a period of not less than five years from plicable 21/2 month period (as defined in II. Background the date the payment would otherwise § 1.409A–1(b)(4)) in order to qualify as A. Section 409A of the Code have been made, and (iii) any election a short-term deferral. The applicable 21/2 related to a payment to be made at a spec- month period is the period ending on the Section 409A prescribes certain re- ified time or pursuant to a fixed schedule 15th day of the third month following the quirements applicable to nonqualified will be made not less than 12 months prior later of the end of the service provider’s deferred compensation plans. If a plan to the date of the first scheduled payment. first taxable year in which the right to pay- does not meet those requirements, partic- Section 1.409A–2(b)(7) of the Income ment is no longer subject to a substantial ipants in the plan are required to include Tax Regulations provides that a payment risk of forfeiture or the end of the service 2009–52 I.R.B. 964 December 28, 2009 recipient’s first taxable year in which such authorizes the Secretary to take such the compensation structures of any other right is no longer subject to such risk. Un- actions as the Secretary deems necessary executive officers of the Exceptional As- der § 1.
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