Section 409A Six-Month Delay Rule Flowchart and Separation Benefit Exceptions Chart

Summary

The first flowchart below illustrates when the six-month delay rule under I.R.C. § 409A (Section 409A) applies to a payment of nonqualified deferred compensation. To comply with the six-month delay rule, which applies to "specified employees" (i.e., certain highly compensated officers and employee shareholders of a publicly traded corporation) in an arrangement providing for deferred compensation that is subject to Section 409A must set forth alternative payment provisions, if necessary, to ensure that no payment to a specified employee that is triggered by the employee's separation from service is paid within the six-month period commencing on the separation date (or death, if earlier). I.R.C. § 409A(a)(2)(B)(i); 26 C.F.R. § 1.409A-3(i)(2).