An automatic exemption from violating Internal Revenue Code Section 409A on nonqualified deferred compensation. This provision allows a short-term delay in payment after compensation is earned in one tax year but is not paid until another. To fit into this exemption, the payout must be made, as with restricted stock units and performance shares, by the later of either (1) two and a half months after the close of the tax year in which the risk of forfeiture lapsed (e.g. by March 15 for a performance cycle ending on Dec. 31 of the prior year) or (2) March 15 of the calendar year following the year in which the award vested. Technically, the payment must occur within two and a half months after the end of the later of either the company's or the executive's tax year, which is March 15 for calendar-year companies. The deadline of March 15 is fixed and does not shift if the 15th happens to fall on a weekend (see an explanation by the law firm Bryan Cave).

Proposed rules issued by the IRS in 2016 allow an employer to fit into this exemption, even when the payment is made after the 2½ month period, if the employer cannot make it within that timeframe because doing so would violate the securities laws or other applicable laws, or if doing so would be administratively impractical. For details of the proposed rules, see commentaries from Loeb & Loeb and Ropes & Gray.