Resumen
Internal Revenue Code (the Code) 409A creates special rules for nonqualified deferred compensation plans, including discounted stock options, severance arrangement, and even some expense reimbursement arrangements. The primary themes of Section 409A are restrictions that it places upon operation of the deferred compensation plan. In general, it places restrictions on the elections necessary to defer compensation, restrictions on the funding of the plan, and restrictions on the distributions from the plan. If the requirements of Code 409A and its regulations are not met, all amounts that had been excluded from gross income under the deferred compensation plan are currently included in gross income. Additionally. there is interest due from the original deferral that is one percentage point higher than the regular rate of interest for underpayments, plus a crushing additional 20 percent penalty.[1] Accordingly it is of paramount importance to understand how these rules apply, and how to avoid the severe penalties. [1] Code 409A(a).