409B Nonqualified Deferred Compensation Plans are different than a typical retirement type plan such as a 401K plan or 403B. The 409A is for someone who works a 10 month period versus a 12 month period year. This program mostly applies to teachers who could potentially meet the I.R.S. standards. The 409A standard applies to compensation that workers earn in one year, but is actually paid in a future year. This is what is called a nonqualified deferred compensation plan. If deferred compensation meets the requirements of 409A, then there is no effect on the employees taxes. The compensation is taxed in the same manner as it would be taxed if it were not covered by 409A. If the arrangement does not the requirements of 409A, the compensation is subject to certain additional taxes, including a 20% additional income tax. 409A has no effect on F.I.C.A. (Social Security and Medicare) tax. If you are considering retirement options find out the important rules that could potentially benefit you by speaking to one of our retirement specialists by calling us toll free 877-775-0812.
