Oct. 18 — Proposed rules on state and local government-deferred compensation plans may be getting some high marks from the tax community but still need a little work, attorneys told the IRS during a hearing.
The long-awaited regulation under tax code Section 457 on how to tax deferred compensation plans for state and local governments, which were issued in June, showed a “softening” from the Internal Revenue Service on this topic, Kirk Sherman of Sherman & Patterson Ltd. in Maple Plain, Minn., told representatives of the IRS at an Oct. 18 hearing on the proposed rules.
Deferred compensation plans are employer-sponsored plans or arrangements in which a portion of an employee’s current compensation is payable in a later tax year.
While Sherman had some good things to say about the rules, he said they still need some tailoring “on the margin” to help with “understanding and compliance.”
One area in the proposed rules that might need some clarification is the section addressing elective deferral plan rules, Sherman said.
“The elective deferral plan rules are clear when applied to a vanilla deferral. ‘I elect to defer X percent of my salary,’ but applying these rules to two other common plan designs is not as clear,” he said.
Sherman’s partner, James Patterson, asked the IRS not to rush into finalization of the rules and to give final rules an effective date of Jan. 1, 2018, only if they are issued before the end of March 2017. This would allow everyone time to get acquainted with the final rules and make any necessary changes before the effective date, he said.
“The industry has waited nine years to get this proposed guidance and the guidance is different” from what the IRS “anticipated giving, which we are very happy about,” Patterson said.
Because of the time it took to get the rules and the changes that were included in the guidance, there should be an “orderly and not rushed rollout of the rules,” he said.
To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)