What are some of the rules affecting separation pay plans?
Kenneth: Separation pay plans and severance agreements may be subject to 409A. The final regulations clarify and expand several of the exemptions from 409A that are applicable to separation pay plans and also provide guidance to facilitate compliance of separation pay plans that are subject to 409A. For example, a separation pay plan where severance is paid upon an actual involuntary separation from service or pursuant to a “window program” is exempt from 409A if the entire amount paid under such plan to any employee does not exceed two times the employee’s compensation for the year prior to separation (or, if less, two times the annual compensation limit then applicable to tax-qualified plans, the limit being $225,000 for 2007) and is paid no later than December 31 of the second calendar year following the calendar year in which the employee’s separation from service occurs. The final regulations provide circumstances under which an employee’s separation from service will be considere
