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Two sections of the Internal Revenue Code continue to challenge companies in creating compensation arrangements. They are Section 409A (“409A”) that governs the treatment of nonqualified deferred compensation arrangements, and Section 162(m), which limits the annual compensation deduction a public company may take for certain executive officers. This memo notes some of the key pitfalls that can cause unintended consequences and penalties under 409A.  Since Section 162(m) only applies to public companies, we will leave it for another day.


409A is a full set of requirements that govern the broadly defined universe of nonqualified deferred compensation...

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