Executive Benefits

409A Correction for Unvested Amounts Clarified

409A Correction for Unvested Amounts Clarified

Author Executive Benefits Team
Date May 6, 2015
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The National Law Review has published a short article by Covington Law Firm Partner, Robert Newman, titled, “409A Correction for Unvested Amounts Clarified.” The article reviews a recently released chief counsel advice memorandum intended to clarify the mechanism for correcting 409A violations. As the article points out, the discovery of a 409A violation generally spurs the search for ways to correct the problem.

The takeaway from the informative piece is  that the IRS memorandum has recognized that a 409A violation can be corrected, (and done so without resulting in adverse tax consequences) as long as no portion of the deferred compensation is vested at the end of the year in which the correction occurs.

The memorandum explains that, during at least a portion of Year 3, the bonus terms did not comply and, by the end of that year, the bonus had vested.”

More on Understanding 409A Correction for Unvested Amounts

Follow this link to read the full article, which includes relevant examples. (409A Correction for Unvested Amounts Clarified)  And contact any member of our executive benefits team to learn more about well-designed, equity-based incentive programs that can help deliver long-term wealth benefits.


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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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