Analyzing Separations from Service Under Section 409A

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Many employers maintain nonqualified deferred compensation plans for their employees.  These plans are subject to Section 409A of the Internal Revenue Code.  Nonqualified plans typically pay benefits upon one or more specified events, including when an employee leaves employment: a so-called “separation from service” under Section 409A. Employers must get the payment timing right on a separation from service, or else their employees may face severe Section 409A penalties: immediate income inclusion for all vested deferred compensation owed the employee under the plan plus a 20 percent additional tax on the included compensation and interest.

The Section 409A rules surrounding “separations from service” are complex, and it is not always clear when an employee's deferred compensation should be paid.  As a result, separations from service have become a common source of inadvertent Section 409A trouble for many employers.  Attorneys and HR professionals who understand Section 409A’s separation from service rules will be better able to ensure that deferred compensation amounts are paid timely and avoid potentially costly Section 409A failures.

Educational Objectives:
• Understand when a termination of employment is (and isn’t) a Section 409A separation from service.
• Become familiar with treatment of complicated separation from service scenarios.
• Learn best practices for avoiding Section 409A separation from service failures.

Who would benefit most from attending this program?
Attorneys and HR professionals involved in employee termination process, and attorneys who draft plans and agreements subject to Section 409A.



William Fogleman is an associate in the Plan Design and Taxation Practice at Groom Law Group.  His experience includes assisting clients with qualified retirement plans and nonqualified deferred compensation plans, equity and cash-based incentive compensation arrangements at public and private employers, and employment agreements and separation agreements for individual executives.  Mr. Fogleman also has extensive experience with compensation and benefits issues that arise in connection with corporate transactions.

Mr. Fogleman earned a J.D. from Cornell Law School and a B.A., Union College. He is admitted to practice federal matters in New York.


Daniel Hogans is a partner in Morgan Lewis's Employee Benefits and Executive Compensation Practice, resident in the Washington, D.C. office. Prior to joining Morgan Lewis, Mr. Hogans was an attorney advisor in the Office of Benefits Tax Counsel at the U.S. Department of the Treasury. In this role, he served as an advisor to senior Treasury officials and Congressional staff on both legislative and regulatory matters relating to employee benefits and executive compensation. Mr. Hogans also served as the leading Treasury representative in the development of regulations and other guidance governing the federal tax treatment of equity and deferred compensation arrangements of corporations and partnerships, including regulations under section 409A. Before joining the Treasury Department, Mr. Hogans was in private practice for 10 years.


Mr. Hogans earned a J.D. from the College of William & Mary, Marshall-Wythe School of Law, an M.S. from the University of Virginia, and a B.S. from George Mason University. He is admitted to practice in the District of Columbia.



As head of his firm's Executive Compensation Group, John McGuiness concentrates his practice on the design and administration of executive compensation arrangements for large public and private companies. He has particular expertise in the tax and ERISA issues for executive deferred compensation and equity compensation arrangements.  He has also worked extensively on bonus, severance and tax-qualified retirement plans.

Mr. McGuiness has written articles and spoken on topics such as deferred compensation rules under Code section 409A, performance-based compensation under section 162(m), the SEC's executive compensation disclosure rules, rabbi trusts and issues under the Sarbanes-Oxley Act. He has also served as Groom’s Executive Principal in charge of managing the firm since the beginning of 2012.

Mr. McGuiness earned a J.D. from The College of William & Mary and a B.S., with distinction, from the University of Virginia. He is admitted to practice in the District of Columbia.