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Section 457A

Somewhat similar to IRC Section 409A, Section 457A of the Internal Revenue Code governs deferred compensation for US employees working for certain "nonqualified entities" (e.g. US citizens working for a foreign company in a tax haven such as Bermuda). While developed largely to cover offshore hedge funds, Section 457A has a broader application. In short, deferred compensation stops being tax-deferred once it vests and is no longer subject to a risk of forfeiture. Penalties like those under Section 409A can apply. For standard equity compensation settled in shares, this provision does not raise problems, though it can when RSUs have a share-deferral feature. The IRS issued guidance on this provision in Notice 2009-8 and Revenue Ruling 2014-18.

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