Built on the foundation of the Tax Management Portfolios™, Bloomberg Tax is a comprehensive tax research solution designed by tax practitioners for tax practitioners.
By David L. Wolfe, Esq., and Joshua J. Waldbeser, Esq.
Drinker Biddle & Reath LLP, Chicago, IL
After a lengthy period of silence, it appears that the IRS is getting ready to issue the long-anticipated regulations governing Internal Revenue Code ("Code") §457(f) plans. As a reminder, 457(f) plans are nonqualified deferred compensation plans that may be sponsored by tax-exempt and governmental entities, and provide for greater tax deferral opportunities than are available under 457(b) plans (which generally limit deferrals to $16,500 annually, plus certain catch-up contributions).
Status of the Regulations
On a number of recent occasions, Cheryl Press, Senior Counsel in the IRS Office of Chief Counsel, has addressed the issuance of the regulations. While no official publication date has yet been announced, Ms. Press confirmed, in an April 11 webcast sponsored by the National Association of Government Defined Contribution Administrators (NAGDCA), that the regulations are in the "clearance" process at the IRS and Treasury Department, and could be published by NAGDCA's 2011 annual conference, which falls in September of this year.
Expected Regulatory Changes
Recent comments by Ms. Press also verify practitioners' expectations that the regulations will be a significant piece of guidance that will preclude a number of plan features and practices that have historically been used widely by 457(f) plan sponsors. As discussed in Drinker Biddle's (August 2007 Client Memorandum), the IRS previously described, in Notice 2007-62, several of the expected provisions, which are designed to synchronize 457(f) requirements with those of Code §409A, including:
Ms. Press' recent comments indicate that the IRS's position on these issues has likely remained unchanged, and practitioners should therefore continue to expect that these provisions will be included in the regulations. She has also acknowledged that the IRS recognizes a significant degree of regulatory "confusion" on the part of 457(f) plan sponsors, which may (hopefully) indicate that the regulations will include some manner of "grandfathering" or transitional relief for existing 457(f) accounts. The regulations may well be published in proposed format, with a comment period before they are finalized.
Additional issues to be addressed in the regulations that have only recently been identified by Ms. Press in informal communications, include the following:
Likely Impact on Plan Sponsors
In anticipation of the regulations' release, some 457(f) plan sponsors have already amended their plans to comply with the guidance provided in Notice 2007-62, 2007-32 I.R.B. 311, described above, while others have chosen to wait until the regulations' publication. Plans that have already been amended may, in some cases, require additional amendments to reflect regulatory provisions that were not previously described in Notice 2007-62. The extent to which 457(f) plan document provisions and practices will need to be changed will also depend on the extent of the "grandfathering" or other transitional relief, if any, that is provided for existing accounts in the regulations.
For more information, in the BNA Tax Management Portfolios, see Brisendine, Veal & Drigotas, 385 T.M., Deferred Compensation Arrangements, and in Tax Practice Series, see ¶5710, Nonqualified Deferred Compensation.
© Drinker Biddle & Reath LLP 2011
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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)