This practice note discusses how the nonqualified deferred compensation (NQDC) rules of I.R.C. ยง 409A and its implementing regulations (Section 409A) apply to severance arrangements. Section 409A governs the federal tax treatment of a wide variety of NQDC arrangements, which are 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. Section 409A's strict rules limit distributions to six permissible payment events, including a separation from service, which is described in this practice note. As a result, if the severance arrangement (1) has a payment trigger that includes a separation from service and (2) is subject to Section 409A, then the severance arrangement must comply with Section 409A's strict rules regarding the time and form of payment, as well as use a definition of separation from service that meets the requirements of Section 409A. Otherwise, there would ...