409 Executive Benefit

The 409 is an executive benefit plan is a type of nonqualified deferred compensation plan that lets select, highly compensated employees enjoy tax advantages by deferring a greater percentage of their compensation (and current income taxes) than is allowed by the IRS in a qualified retirement plan1.

IRC Sec. 409 (p) is an antiabuse provision introduced by the Economic Growth and Tax Relief Reconciliation Act of 2001 to close this loophole that allowed disproportionate benefits to a select few and eliminate perceived abuse of the law. The 2001 legislation imposed stringent testing to determine who benefits from the ESOP at certain levels2.

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(1) (2) https://www.esopmarketplace.com/article/daniel-zugell-business-transition-advisors/executive-benefits-for-esop-owned-s-corporations-post-irc-secs-409a-and-409-p-