Transition relief for correcting severance plan documents expires on December 31,2012

HRS Insight

Many severance, change in control, and employment agreements provide that an employee's severance payments are conditioned on the employee's execution of a release within a 60- or 90-day period. This conditional payment window could be problematic under Section 409A if it allows the employee to choose a different taxable year to receive the payments by delaying his or her action. Employers have until December 31, 2012 to amend plan documents in existence on December 31, 2010 to remove the ability of a service recipient to delay or accelerate the timing of the payment.

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