Section 409A Change-in-Control Payment Events

Summary

This practice note discusses the rules related to the change-in-control events that can be used to trigger payment under nonqualified deferred compensation (NQDC) arrangements that are governed by I.R.C. § 409A (Section 409A). For purposes of this practice note, a NQDC arrangement is generally defined as any legally binding compensation arrangement where payment is or can be made in a taxable year after the taxable year in which the arrangement is created, and which is not exempt from Section 409A. The strict rules regarding the time and form of payment of NQDC arrangements limit distributions to six permissible payment events, including the change-in-control events described in this practice note. As a result, if the NQDC arrangement has a payment trigger that includes a change-in-control event, then the arrangement must use a definition of change in control that meets the requirements of Section 409A (referred to here as a permissible or 409A change-in-control event). Otherwise, ...