PSC retirement agreements may be subject to sec. 409A prop. regs.(personal service corporations)

Tax Adviser, The, March, 2006 by Adkins, Eddie

Many deferred compensation agreements between personal service corporations (PSCs) and their retired owners are subject to a limit based on the PSC's net income. This limit is meant to protect the PSC if it experiences financial difficulties. Typically, if the cap comes into play, the amount otherwise payable is added to the end of the agreement.

Once the deferred compensation is earned, Sec. 409A permits changes to the payment schedule only under limited circumstances. For instance, generally any changes in the timing of a distribution must be made 12 months before the date of the first scheduled payment; the delay in the payment must be for at least five years from the date the payment would have otherwise been made.

Applying these rules to payment...

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