# US section 409a valuation review
> Source: https://legalcode.md/skills/legalcode-us-section-409a-valuation-review | [HTML version](https://legalcode.md/skills/legalcode-us-section-409a-valuation-review)

Review nonqualified deferred compensation arrangements for IRC Section 409A compliance — assess valuation methodologies, verify safe harbor qualification…

Review nonqualified deferred compensation arrangements for IRC Section 409A compliance — assess valuation methodologies, verify safe harbor qualification (independent appraisal, illiquid startup presumption, formula method), analyze stock option pricing, audit permissible payment events, evaluate the short-term deferral exception, apply the six-month delay rule, identify operational and documentary failures, assess correction program eligibility, and model penalty exposure. Use when conducting 409A compliance audits, granting stock options or SARs, reviewing deferred compensation plan documents, preparing for M&A transactions involving executive compensation, advising on employment or separation agreements with deferred pay, or evaluating IRS correction program eligibility for prior violations. US federal law only (IRC § 409A and 26 CFR § 1.409A).

This skill reviews nonqualified deferred compensation (NQDC) arrangements for compliance with IRC § 409A and the final regulations under 26 CFR § 1.409A-1 through 1.409A-6. **Covers:** - Classification of arrangements as covered or exempt from § 409A - Safe harbor valuation analysis for stock options and SARs - Option/SAR grant compliance (FMV pricing, no deferral features) - Permissible payment event audit (all six triggers) - Short-term deferral exception (2.5-month rule) - Six-month delay rule for specified employees of public companies - Documentary compliance (written plan requirements) - Operational failure identification and severity assessment - IRS correction program eligibility (Notice 2008-113, Notice 2010-6) - Penalty exposure modeling (income inclusion + 20% excise tax + interest) - M&A 409A considerations (change-in-control definitions, acceleration, cash-outs) - State-law overlay (California 20% additional penalty) **Does not:** - Provide tax advice or substitute for qualified counsel - Cover qualified plans (§ 401(k), § 403(b), defined benefit plans) — those are exempt - Cover ISOs under § 422 or ESPPs under § 423 — those are automatically exempt - Apply to non-US deferred compensation arrangements - Address § 457A (offshore deferred compensation) — separate analysis required **United States federal tax law only.** This skill applies IRC § ...

## Jurisdictions

United States — Federal



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