Board Resolutions: Nonqualified Deferred Compensation Plan Termination
(Liquidation of All Similar Plans)

Summary

These board resolutions templates can be used to terminate a nonqualified deferred compensation plan (NQDC plan) and all similar plans to allow for the accelerated payment of amounts deferred under the plan, in compliance with the I.R.C. § 409A rules for nonqualified deferred compensation arrangements. A complete termination and liquidation of is one of the few circumstances in which Section 409A allows deferred compensation to be paid earlier than otherwise provided in a plan. This template contains drafting notes and alternate clauses. To qualify for the exception, (i) the company must irrevocably terminate not only the target plan, but also any NQDC plans in the company’s controlled group that are in the same category under Section 409A plan aggregation rules, (ii) the liquidation payments must be made within the 12-month period beginning on the first anniversary of the date the company took irrevocable action to terminate the plan(s), (iii) the company (and its affiliates) may not adopt a new NQDC plan that would be in the same category as the target plan for three years, and (iv) the company must not be experiencing a financial downturn at the time of termination. 26 C.F.R. § 1.409A-3(j)(4)(ix)(C). (More lenient rules apply when terminating an NQDC plan in connection with a change in control of the company.) For resolutions applicable when terminating an NQDC plan in connection with a change in control, see Board Resolutions: Nonqualified Deferred Compensation Plan Termination (Change in Control). For more information on this topic, see Section 409A Plan Termination Exceptions Checklist