Getting Govt. Bailout Funds Doesn't Trigger 409A 'Change in Control'

June 4, 2009 ( - Companies with a non-qualified deferred compensation plan (NQDC) under 409A can't make a payment under the plan based on getting government bailout funds.

That was the word Thursday from the Internal Revenue Service (IRS) in Notice 2009-49 about whether getting bailout money under the Emergency Economic Stabilization Act ¬† (EESA) represents a “change in control” and, therefore, a permissible triggering event for a NQDC payment.

Tax agency officials said the guidance applies when the U.S. Treasury Department receives an equity stake or warrants allowing it to purchase stock in a company as part of delivering bailout assistance to the issuing company.

Permitting a 409A payment could be contrary to the public interest because it might reduce the available liquidity of a company seeking government help, the IRS said.

The guidance is effective immediately. The IRS release is available  here .