Internal Revenue Code Section 409A

Section 409A of the Internal Revenue Code regulates non-qualified deferred compensation plans, which let employees defer income to future years. It mandates specific rules for how and when the deferred amounts are vested and paid, aiming to prevent unfair tax advantages. If these rules aren’t followed, employees face immediate income inclusion, additional taxes, and penalties. Essentially, Section 409A is designed to ensure that deferred compensation arrangements are structured properly to avoid tax abuses and maintain fair tax treatment.