IRS 409A is a common shorthand reference to the Internal Revenue Service guidance and enforcement surrounding IRC Section 409A, which regulates nonqualified deferred compensation plans. While Section 409A is the statute itself, practitioners often use the phrase IRS 409A to refer collectively to regulations, notices, audit practices, and correction programs that apply to deferred compensation arrangements. These rules impose strict requirements on deferral elections, funding, permissible distribution events, and changes in payout timing, and they can impose severe penalties on executives if plans are noncompliant. In the life insurance context, IRS 409A issues arise when policies are used as informal funding for deferred compensation or supplemental executive retirement plans.

In practice, advisors encounter IRS 409A considerations when they work with employers and benefits consultants to design executive compensation packages that include deferred bonuses, phantom stock, or salary deferrals informally backed by corporate owned life insurance. While the life insurance product itself does not determine 409A compliance, the overall plan design must satisfy IRS rules on when amounts are considered deferred, when they can be distributed, and how changes to schedules are handled. Advisors typically partner with legal and tax experts to review plan documents, ensure written terms match administrative practice, and correct identified defects under IRS programs when possible. By recognizing when IRS 409A is implicated, producers can help employers avoid inadvertently punitive tax consequences for key employees and can position life insurance as a stable, tax efficient asset supporting a compliant nonqualified benefit strategy.