With certain limitations, severance arrangements resulting from terminations pursuant to “window programs” are not subject to Section 409A.
What is a “window program”? A window program is a program, available for a limited period of time (no longer than 12 months), that the employer establishes to provide severance to employees that terminate service under specified circumstances during that period.
How do you know if your employer has established a “window program”? A program will not be considered a window program if an employer establishes a pattern of repeatedly providing severance in similar situations for substantially consecutive, limited periods of time.
Whether the recurrence of these programs constitutes a pattern is determined based on the facts and circumstances. Relevant factors to weigh in considering whether a pattern exists is whether severance is provided on account of a specific business event or condition, the degree to which severance relates to the event or condition, and whether the event or condition is temporary or discrete or is a permanent aspect of the employer’s business. No one factor is determinative.
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