Code Sections 409A and 280G Considerations for Executive Employment Agreements

Attorneys on both the executive side and the company side have an interest in drafting an employment agreement that minimizes negative tax consequences. Sections 409A or 280G of the Internal Revenue Code (the "Code") can result in various negative tax consequences if certain compensation arrangements aren't structured properly, including additional taxes owed by the individual and lost tax deductions for the company.  Accordingly, attorneys on both sides will want to avoid unintentional violations of Code Section 409A or unnecessarily triggering Code Section 280G.

In this presentation, Mr. Stack will discuss:

1. The applicability of Code Section 409A to "nonqualified deferred compensation
2. The basic requirements of Code Section 409A
3. The tax consequences of violating Code Section 409A
4. How bonuses, equity awards, phantom equity, and severance can be structured in an employment agreement to either be exempt from or compliant with Code Section 409A
5. The applicability of Code Section 280G to "parachute payments"
6. The consequences of triggering Code Section 280G
7. Who is a "disqualified individual" under Code Section 280G
8. What kind of compensation can be a parachute payment
9. How to calculate whether a disqualified individual triggers Code Section 280G
10. The shareholder approval exemption from Code Section 280G
11. Code Section 280G cutback provisions

Learning Objectives:

1. Examine when compensation is subject to or exempt from Code Section 409A
2. Review how to structure various forms of compensation in a manner that complies with Code Section 409A or is exempt from Code Section 409A
3. Calculate when "disqualified individuals" trigger 280G and discuss possible ways to avoid triggering 280G