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CCH® PENSION AND BENEFITS — 9/20/07

IRS developing 457 plan guidance, official says

The IRS is involved in several guidance projects affecting Code Sec. 457 deferred compensation plans, according to a senior IRS attorney. The IRS projects include developing guidance on the definition of a governmental plan under Code Sec. 414(d) and the relationship between Code Sec. 457 and the Code Sec. 409A deferred compensation rules, said senior IRS attorney Cheryl Press of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). Press spoke on September 7, 2007, at an American Law Institute-American Bar Association (ALI-ABA) conference on Retirement and Deferred Compensation Plans of Tax-Exempt and Governmental Employers.

While the IRS plans to issue model plan provisions under the new Code Sec. 403(b) regulations (CCH Pension Plan Guide ¶24,508U ), Press said that the IRS will not be updating the Code Sec. 457(b) model amendments to reflect provisions enacted in the Pension Protection Act of 2006 (P.L.109-280).

IRS will issue private letter rulings on 457 plans

The IRS will issue private letter rulings on eligible deferred compensation plans under Code Sec. 457(b) maintained by a government or tax-exempt employer, Press noted. The IRS’s Employee Plans unit, however, will not rule on whether a plan is a governmental plan under Code Sec. 414(d), she said. The issue affects 401(a) and 403(b) plans as well as 457 plans. The concern is whether an entity qualifies as an agency or instrumentality of a state or the federal government. Press noted that the problem arose when a federal credit union came in for a ruling on its status. However, there is still no correction program for 457 plan arrangements, Press noted. There are some differences under Code Sec. 457 for plans maintained by governments compared to tax-exempt entities, she indicated. Carol Calhoun of the Calhoun Law Group said that many employers qualify as tax-exempt entities, even though their government status is unclear.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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