Frequently during the financial crisis, the COVID pandemic, and now in a rising interest rate environment, we see startup and early-stage growth companies that, in the effort to conserve cash, reduce or eliminate the pay of the founders and senior executives for some period of time. While this step is logical and critical to the company achieving long-term success, it is fraught with potential adverse consequences under Internal Revenue Code section 409A (“section 409A”).

This article is intended to be a general overview of the issues that arise and the proactive and mitigating strategies that may be applied to avoid the harsh tax consequences to the employee when violations of section 409A occur. READ MORE