1. What are the federal tax consequences when a nonqualified deferred compensation plan with a $500,000 balance pays out $50,000 to an individual at a time when the distribution is not permitted under Sec. 409A? Assume the individual’s marginal federal income tax rate is 35 percent. Ignore the premium interest tax for purposes of the calculation.
2. XYZ Company usually pays bonuses to employees by March 15 of the subsequent year. However, XYZ delays the payment of calendar year 2016 bonuses to May 1, 2017. Employees must be employed by XYZ on the payment date in order to receive the bonus. Has XYZ violated the requirements of Sec. 409A? Why or why not?
3. A private company issued nonqualified stock options on December 28, 2016. It used the value as of December 31, 2015 as the exercise price. The value was determined by an independent appraiser. The value as of December 31, 2016 (also determined by an independent appraiser) was significantly higher than the 2015 valuation. Was it acceptable to use the December 31, 2015 valuation to determine the exercise price?
4. A deferred compensation plan provides for payment upon the earliest of the following:

5. Separation from serviceàChange in controlàDeathàDisabilityà2020

   An employee wants to delay the payment to the year 2023. Would doing so violate the requirements of Sec. 409A?