Pub. 3 2012 Issue 2

www.wvbankers.org 20 “publicly traded” can be serious. 409A requires that certain employment agreements, severance pay agreements, equity arrangements, SERPs and other deferred compensation ar- rangements of certain top or “specified” employees, state that certain payments triggered by “separation from service” will be delayed by six months. This is a written requirement, and failure to get the language into the documents in a timely fashion can be an expensive mistake. The deadline, for example, for a company that may consider itself a “private company” but whose shares have begun to be traded on interdealer exchanges, could be, unless certain defaults are elected in a timely manner, as early as April 1 of that year, for deferred compensation arrangements with certain top people. A few interdealer trades could mean agreements are out of 409A compliance very quickly, in other words, even if management does not even know the trades have taken place. Correction of a failure to include the six month delay lan- guage is possible under IRS Notice 2010-6, but an eighteen month delay of payment may be required, instead of a six month delay, and if an executive leaves employment within 12 months of the correction, 50% of the 20% 409A penalty, plus interest, may still be due respecting certain severance pay, SERP payouts and the like. Withholding and reporting penalties may also apply to the company, if reporting and withholding of any applicable 409A penalties etc. is not ac- complished correctly. Due to the broad definition of “publicly traded” under 409A and the rapidly changing securities trading industry, even private companies may want to consult their advisors to have language added to their deferred compensation plans, agree- ments and arrangements, to the effect that if the company ever becomes publicly traded, as defined under 409A, then the six month delay will be effective as needed to comply with 409A’s requirements. Otherwise, failure to comply with 409A could cost executives tax, with interest and a 20% penalty that they were not expecting, and could result in unexpected reporting and withholding headaches for employ- ers as well.  Failure to comply with 409A could cost executives tax, with interest and a 20% penalty that they were not expecting, and could result in unexpected reporting and withholding headaches for employers as well.  Publicly Traded — continued from page 19 programs, it is only one plan of attack. The best approach is having a culture within the organization that consistently aims to improve the employee/employer risk score. What options are out there for employers who want to ad- dress their employee risk score? First and foremost, you can hire a third party administrator of Wellness programs to help introduce and customize a plan that works for you and your employees. Second, work with a reputable insurance agent who can tie in Wellness programs to your Employee Benefits program to help further your employee risk score. The continued cost pressures of Employee Benefits pro- grams are not going to go away. Therefore, Wellness is not a fad — it is going to continue to grow. Rather than thinking of your Employee Benefits program as a liability, you should instead think of it as an asset. Well-run Wellness programs can incentivize employees to make healthy lifestyle changes, improve absenteeism/presenteeism and, most importantly, reduce your Employee Benefit risks score.   Wellness — continued from page 17 Should you require more information concerning the legal and business aspects of the above, please feel free to contact the authors, Sandra Murphy, directly at (304) 347-1131 or via e-mail at smurphy@bowlesrice.com or Lynn Clarke, directly at (304) 347-2122 or via e-mail at lclarke@bowlesrice.com. Ms. Murphy is a partner in Bowles Rice McDavid Graff & Love LLP, focusing on banking and commercial law and Ms. Clarke is Special Counsel at the firm, practicing in the areas of Employee Benefits, Executive Compensation and ERISA. Bowles Rice McDavid Graff & Love LLP is general counsel to the West Virginia Bankers Association. Geoff Christian is a partner of Commercial Insurance Services and senior vice president in the Benefits Division. Commercial Insurance is WV’s largest independent insurance agency with locations in Charleston and Morgantown, WV, as well as Ashland, KY. Mr. Christian can be reached at (304) 345-8000 or via email at Geoff@ciswv.com .