409a Valuation Background Information Section 409A was added to the Internal Revenue Code ("IRC") by the Internal Revenue Service ("IRS") in October 2004 as Section 885 of the American Jobs Creation Act of 2004, and it went into effect on December 31, 2004. IRC The IRS enacted Section 409A in response to the Enron Corporation's 2001 scandal, which involved several compensation-related accounting frauds. Among Enron's fraudulent activities was the awarding of large stock options and deferred compensation to key executives. Prior to Enron's bankruptcy in 2001, certain key executives accelerated the vesting of their stock options, exercised them, and sold the underlying stock at all-time highs. These actions protected a few individuals' interests while costing the remaining Enron employees a large portion of their retirement savings. As a result of Enron's nefarious actions, the IRS added Section 409a Valuation to the IRC on January 1, 2005, ...