26 U.S.C. § 457 — Deferred compensation plans of State and

Page 1585 TITLE 26—INTERNAL REVENUE CODE § 457 (d) Transitional rule (1) Amount includible in gross income for elec- tion years If a taxpayer makes an election under this section with respect to prepaid dues income, such taxpayer shall include in gross income, for each taxable year to which such election applies, not only that portion of prepaid dues income received in such year otherwise includ- ible in gross income for such year under this section, but shall also include in gross income for such year an additional amount equal to the amount of prepaid dues income received in the 3 taxable years preceding the first taxable year to which such election applies which would have been included in gross income in the taxable year had the election been effec- tive 3 years earlier. (2) Deductions of amounts included in income more than once A taxpayer who makes an election with re- spect to prepaid dues income, and who in- cludes in gross income for any taxable year to which the election applies an additional amount computed under paragraph (1), shall be permitted to deduct, for such taxable year and for each of the 4 succeeding taxable years, an amount equal to one-fifth of such addi- tional amount, but only to the extent that such additional amount was also included in the taxpayer’s gross income during any of the 3 taxable years preceding the first taxable year to which such election applies. (e) Definitions For purposes of this section— (1) Prepaid dues income The term ‘‘prepaid dues income’’ means any amount (includible in gross income) which is received by a membership organization in con- nection with, and is directly attributable to, a liability to render services or make available membership privileges over a period of time which extends beyond the close of the taxable year in which such amount is received. (2) Liability The term ‘‘liability’’ means a liability to render services or make available membership privileges over a period of time which does not exceed 36 months, which liability shall be deemed to exist ratably over the period of time that such services are required to be ren- dered, or that such membership privileges are required to be made available. (3) Membership organization The term ‘‘membership organization’’ means a corporation, association, federation, or other organization— (A) organized without capital stock of any kind, and (B) no part of the net earnings of which is distributable to any member. (4) Receipt of prepaid dues income Prepaid dues income shall be treated as re- ceived during the taxable year for which it is includible in gross income under section 451 (without regard to this section). (Added Pub. L. 87–109, § 1(a), July 26, 1961, 75 Stat. 222; amended Pub. L. 94–455, title XIX, §§ 1901(a)(68), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1775, 1834.) Editorial Notes AMENDMENTS 1976—Subsec. (c). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’ wher- ever appearing. Subsec. (c)(3)(B). Pub. L. 94–455, § 1901(a)(68), sub- stituted ‘‘for its first taxable year’’ for ‘‘for its first taxable year (i) which begins after December 31, 1960, and (ii)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1901(a)(68) of Pub. L. 94–455 ef- fective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94–455, set out as a note under section 2 of this title. EFFECTIVE DATE Pub. L. 87–109, § 2, July 26, 1961, 75 Stat. 224, provided that: ‘‘The amendments made by this Act [enacting this section] shall apply with respect to taxable years beginning after December 31, 1960.’’ § 457. Deferred compensation plans of State and local governments and tax-exempt organiza- tions (a) Year of inclusion in gross income (1) In general Any amount of compensation deferred under an eligible deferred compensation plan, and any income attributable to the amounts so de- ferred, shall be includible in gross income only for the taxable year in which such compensa- tion or other income— (A) is paid to the participant or other ben- eficiary, in the case of a plan of an eligible employer described in subsection (e)(1)(A), and (B) is paid or otherwise made available to the participant or other beneficiary, in the case of a plan of an eligible employer de- scribed in subsection (e)(1)(B). (2) Special rule for rollover amounts To the extent provided in section 72(t)(9), section 72(t) shall apply to any amount includ- ible in gross income under this subsection. (3) Special rule for health and long-term care insurance In the case of a plan of an eligible employer described in subsection (e)(1)(A), to the extent provided in section 402(l), paragraph (1) shall not apply to amounts otherwise includible in gross income under this subsection. (b) Eligible deferred compensation plan defined For purposes of this section, the term ‘‘eligi- ble deferred compensation plan’’ means a plan established and maintained by an eligible em- ployer— (1) in which only individuals who perform service for the employer may be participants, (2) which provides that (except as provided in paragraph (3)) the maximum amount which may be deferred under the plan for the taxable Page 1586 TITLE 26—INTERNAL REVENUE CODE § 457 year (other than rollover amounts) shall not exceed the lesser of— (A) the applicable dollar amount, or (B) 100 percent of the participant’s includ- ible compensation, (3) which may provide that, for 1 or more of the participant’s last 3 taxable years ending before he attains normal retirement age under the plan, the ceiling set forth in paragraph (2) shall be the lesser of— (A) twice the dollar amount in effect under subsection (b)(2)(A), or (B) the sum of— (i) the plan ceiling established for pur- poses of paragraph (2) for the taxable year (determined without regard to this para- graph), plus (ii) so much of the plan ceiling estab- lished for purposes of paragraph (2) for tax- able years before the taxable year as has not previously been used under paragraph (2) or this paragraph, (4) which provides that compensation— (A) in the case of an eligible employer de- scribed in subsection (e)(1)(A), will be de- ferred only if an agreement providing for such deferral has been entered into before the compensation is currently available to the individual, and (B) in any other case, will be deferred for any calendar month only if an agreement providing for such deferral has been entered into before the beginning of such month, (5) which meets the distribution require- ments of subsection (d), and (6) except as provided in subsection (g), which provides that— (A) all amounts of compensation deferred under the plan, (B) all property and rights purchased with such amounts, and (C) all income attributable to such amounts, property, or rights, shall remain (until made available to the par- ticipant or other beneficiary) solely the prop- erty and rights of the employer (without being restricted to the provision of benefits under the plan), subject only to the claims of the employer’s general creditors. A plan which is established and maintained by an employer which is described in subsection (e)(1)(A) and which is administered in a manner which is inconsistent with the requirements of any of the preceding paragraphs shall be treated as not meeting the requirements of such para- graph as of the 1st plan year beginning more than 180 days after the date of notification by the Secretary of the inconsistency unless the employer corrects the inconsistency before the 1st day of such plan year. A plan which is estab- lished and maintained by an employer which is described in subsection (e)(1)(A) shall not be treated as failing to meet the requirements of this subsection solely because the plan, or an- other plan maintained by the employer which meets the requirements of section 401(a) or 403(b), provides for matching contributions on account of qualified student loan payments as described in section 401(m)(13). (c) Limitation The maximum amount of the compensation of any one individual which may be deferred under subsection (a) during any taxable year shall not exceed the amount in effect under subsection (b)(2)(A) (as modified by any adjustment pro- vided under subsection (b)(3)). (d) Distribution requirements (1) In general For purposes of subsection (b)(5), a plan meets the distribution requirements of this subsection if— (A) under the plan amounts will not be made available to participants or bene- ficiaries earlier than— (i) the calendar year in which the partic- ipant attains age 701⁄2 (in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 591⁄2), (ii) when the participant has a severance from employment with the employer, (iii) when the participant is faced with an unforeseeable emergency (determined in the manner prescribed by the Secretary in regulations), or (iv) except as may be otherwise provided by regulations, in the case of a plan main- tained by an employer described in sub- section (e)(1)(A), with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)), the date that is 90 days prior to the date that such lifetime income investment may no longer be held as an investment option under the plan, (B) the plan meets the minimum distribu- tion requirements of paragraph (2), (C) in the case of a plan maintained by an employer described in subsection (e)(1)(A), the plan meets requirements similar to the requirements of section 401(a)(31), and (D) except as may be otherwise provided by regulations, in the case of amounts de- scribed in subparagraph (A)(iv), such amounts will be distributed only in the form of a qualified distribution (as defined in sec- tion 401(a)(38)(B)(i)) or a qualified plan dis- tribution annuity contract (as defined in section 401(a)(38)(B)(iv)). Any amount transferred in a direct trustee-to- trustee transfer in accordance with section 401(a)(31) shall not be includible in gross in- come for the taxable year of transfer. (2) Minimum distribution requirements A plan meets the minimum distribution re- quirements of this paragraph if such plan meets the requirements of section 401(a)(9). (3) Special rule for government plan An eligible deferred compensation plan of an employer described in subsection (e)(1)(A) shall not be treated as failing to meet the re- quirements of this subsection solely by reason of making a distribution described in sub- section (e)(9)(A). (4) Participant certification In determining whether a distribution to a participant is made when the participant is Page 1587 TITLE 26—INTERNAL REVENUE CODE § 457 faced with an unforeseeable emergency, the administrator of a plan maintained by an eli- gible employer described in subsection (e)(1)(A) may rely on a written certification by the participant that the distribution is— (A) made when the participant is faced with an unforeseeable emergency of a type which is described in regulations prescribed by the Secretary as an unforeseeable emer- gency, and (B) not in excess of the amount required to satisfy the emergency need, and that the participant has no alternative means reasonably available to satisfy such emer- gency need. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan ad- ministrator has actual knowledge to the con- trary of the participant’s certification, and for procedures for addressing cases of participant misrepresentation. (e) Other definitions and special rules For purposes of this section— (1) Eligible employer The term ‘‘eligible employer’’ means— (A) a State, political subdivision of a State, and any agency or instrumentality of a State or political subdivision of a State, and (B) any other organization (other than a governmental unit) exempt from tax under this subtitle. (2) Performance of service The performance of service includes per- formance of service as an independent con- tractor and the person (or governmental unit) for whom such services are performed shall be treated as the employer. (3) Participant The term ‘‘participant’’ means an individual who is eligible to defer compensation under the plan. (4) Beneficiary The term ‘‘beneficiary’’ means a beneficiary of the participant, his estate, or any other per- son whose interest in the plan is derived from the participant. (5) Includible compensation The term ‘‘includible compensation’’ has the meaning given to the term ‘‘participant’s com- pensation’’ by section 415(c)(3). (6) Compensation taken into account at present value Compensation shall be taken into account at its present value. (7) Community property laws The amount of includible compensation shall be determined without regard to any community property laws. (8) Income attributable Gains from the disposition of property shall be treated as income attributable to such property. (9) Benefits of tax exempt organization plans not treated as made available by reason of certain elections, etc. In the case of an eligible deferred compensa- tion plan of an employer described in sub- section (e)(1)(B)— (A) Total amount payable is dollar limit or less The total amount payable to a participant under the plan shall not be treated as made available merely because the participant may elect to receive such amount (or the plan may distribute such amount without the participant’s consent) if— (i) the portion of such amount which is not attributable to rollover contributions (as defined in section 411(a)(11)(D)) does not exceed the dollar limit under section 411(a)(11)(A), and (ii) such amount may be distributed only if— (I) no amount has been deferred under the plan with respect to such participant during the 2-year period ending on the date of the distribution, and (II) there has been no prior distribu- tion under the plan to such participant to which this subparagraph applied. A plan shall not be treated as failing to meet the distribution requirements of subsection (d) by reason of a distribution to which this subparagraph applies. (B) Election to defer commencement of dis- tributions The total amount payable to a participant under the plan shall not be treated as made available merely because the participant may elect to defer commencement of dis- tributions under the plan if— (i) such election is made after amounts may be available under the plan in accord- ance with subsection (d)(1)(A) and before commencement of such distributions, and (ii) the participant may make only 1 such election. (10) Transfers between plans A participant shall not be required to in- clude in gross income any portion of the entire amount payable to such participant solely by reason of the transfer of such portion from 1 eligible deferred compensation plan to another eligible deferred compensation plan. (11) Certain plans excluded (A) In general The following plans shall be treated as not providing for the deferral of compensation: (i) Any bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plan. (ii) Any plan paying solely length of service awards to bona fide volunteers (or their beneficiaries) on account of qualified services performed by such volunteers. (B) Special rules applicable to length of serv- ice award plans (i) Bona fide volunteer An individual shall be treated as a bona fide volunteer for purposes of subpara- Page 1588 TITLE 26—INTERNAL REVENUE CODE § 457 graph (A)(ii) if the only compensation re- ceived by such individual for performing qualified services is in the form of— (I) reimbursement for (or a reasonable allowance for) reasonable expenses in- curred in the performance of such serv- ices, or (II) reasonable benefits (including length of service awards), and nominal fees for such services, customarily paid by eligible employers in connection with the performance of such services by vol- unteers. (ii) Limitation on accruals A plan shall not be treated as described in subparagraph (A)(ii) if the aggregate amount of length of service awards accru- ing with respect to any year of service for any bona fide volunteer exceeds $6,000. (iii) Cost of living adjustment In the case of taxable years beginning after December 31, 2017, the Secretary shall adjust the $6,000 amount under clause (ii) at the same time and in the same man- ner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2016, and any increase under this paragraph that is not a multiple of $500 shall be rounded to the next lowest multiple of $500. (iv) Special rule for application of limita- tion on accruals for certain plans In the case of a plan described in sub- paragraph (A)(ii) which is a defined benefit plan (as defined in section 414(j)), the limi- tation under clause (ii) shall apply to the actuarial present value of the aggregate amount of length of service awards accru- ing with respect to any year of service. Such actuarial present value with respect to any year shall be calculated using rea- sonable actuarial assumptions and meth- ods, assuming payment will be made under the most valuable form of payment under the plan with payment commencing at the later of the earliest age at which unre- duced benefits are payable under the plan or the participant’s age at the time of the calculation. (C) Qualified services For purposes of this paragraph, the term ‘‘qualified services’’ means fire fighting and prevention services, emergency medical services, and ambulance services. (D) Certain voluntary early retirement incen- tive plans (i) In general If an applicable voluntary early retire- ment incentive plan— (I) makes payments or supplements as an early retirement benefit, a retire- ment-type subsidy, or a benefit described in the last sentence of section 411(a)(9), and (II) such payments or supplements are made in coordination with a defined ben- efit plan which is described in section 401(a) and includes a trust exempt from tax under section 501(a) and which is maintained by an eligible employer de- scribed in paragraph (1)(A) or by an edu- cation association described in clause (ii)(II), such applicable plan shall be treated for purposes of subparagraph (A)(i) as a bona fide severance pay plan with respect to such payments or supplements to the ex- tent such payments or supplements could otherwise have been provided under such defined benefit plan (determined as if sec- tion 411 applied to such defined benefit plan). (ii) Applicable voluntary early retirement incentive plan For purposes of this subparagraph, the term ‘‘applicable voluntary early retire- ment incentive plan’’ means a voluntary early retirement incentive plan main- tained by— (I) a local educational agency (as de- fined in section 8101 of the Elementary and Secondary Education Act of 1965), or (II) an education association which principally represents employees of 1 or more agencies described in subclause (I) and which is described in section 501(c)(5) or (6) and exempt from tax under section 501(a). (12) Exception for nonelective deferred com- pensation of nonemployees (A) In general This section shall not apply to nonelective deferred compensation attributable to serv- ices not performed as an employee. (B) Nonelective deferred compensation For purposes of subparagraph (A), deferred compensation shall be treated as nonelective only if all individuals (other than those who have not satisfied any applicable initial service requirement) with the same relation- ship to the payor are covered under the same plan with no individual variations or options under the plan. (13) Special rule for churches The term ‘‘eligible employer’’ shall not in- clude a church (as defined in section 3121(w)(3)(A)) or qualified church-controlled organization (as defined in section 3121(w)(3)(B)). (14) Treatment of qualified governmental ex- cess benefit arrangements Subsections (b)(2) and (c)(1) shall not apply to any qualified governmental excess benefit arrangement (as defined in section 415(m)(3)), and benefits provided under such an arrange- ment shall not be taken into account in deter- mining whether any other plan is an eligible deferred compensation plan. (15) Applicable dollar amount (A) In general The applicable dollar amount is $15,000. (B) Cost-of-living adjustments In the case of taxable years beginning after December 31, 2006, the Secretary shall Page 1589 TITLE 26—INTERNAL REVENUE CODE § 457 adjust the $15,000 amount under subpara- graph (A) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2005, and any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500. (16) Rollover amounts (A) General rule In the case of an eligible deferred com- pensation plan established and maintained by an employer described in subsection (e)(1)(A), if— (i) any portion of the balance to the credit of an employee in such plan is paid to such employee in an eligible rollover distribution (within the meaning of sec- tion 402(c)(4)), (ii) the employee transfers any portion of the property such employee receives in such distribution to an eligible retirement plan described in section 402(c)(8)(B), and (iii) in the case of a distribution of prop- erty other than money, the amount so transferred consists of the property dis- tributed, then such distribution (to the extent so transferred) shall not be includible in gross income for the taxable year in which paid. (B) Certain rules made applicable The rules of paragraphs (2) through (7), (9), and (11) of section 402(c) and section 402(f) shall apply for purposes of subparagraph (A). (C) Reporting Rollovers under this paragraph shall be re- ported to the Secretary in the same manner as rollovers from qualified retirement plans (as defined in section 4974(c)). (17) Trustee-to-trustee transfers to purchase permissive service credit No amount shall be includible in gross in- come by reason of a direct trustee-to-trustee transfer to a defined benefit governmental plan (as defined in section 414(d)) if such trans- fer is— (A) for the purchase of permissive service credit (as defined in section 415(n)(3)(A)) under such plan, or (B) a repayment to which section 415 does not apply by reason of subsection (k)(3) thereof. (18) Coordination with catch-up contributions for individuals age 50 or older In the case of an individual who is an eligi- ble participant (as defined by section 414(v)) and who is a participant in an eligible deferred compensation plan of an employer described in paragraph (1)(A), subsections (b)(3) and (c) shall be applied by substituting for the amount otherwise determined under the appli- cable subsection the greater of— (A) the sum of— (i) the plan ceiling established for pur- poses of subsection (b)(2) (without regard to subsection (b)(3)), plus (ii) the lesser of any designated Roth contributions made by the participant to the plan or the applicable dollar amount for the taxable year determined under sec- tion 414(v)(2)(B)(i), or (B) the amount determined under the ap- plicable subsection (without regard to this paragraph). (f) Tax treatment of participants where plan or arrangement of employer is not eligible (1) In general In the case of a plan of an eligible employer providing for a deferral of compensation, if such plan is not an eligible deferred compensa- tion plan, then— (A) the compensation shall be included in the gross income of the participant or bene- ficiary for the 1st taxable year in which there is no substantial risk of forfeiture of the rights to such compensation, and (B) the tax treatment of any amount made available under the plan to a participant or beneficiary shall be determined under sec- tion 72 (relating to annuities, etc.). (2) Exceptions Paragraph (1) shall not apply to— (A) a plan described in section 401(a) which includes a trust exempt from tax under sec- tion 501(a), (B) an annuity plan or contract described in section 403, (C) that portion of any plan which consists of a transfer of property described in section 83, (D) that portion of any plan which consists of a trust to which section 402(b) applies, (E) a qualified governmental excess benefit arrangement described in section 415(m), and (F) that portion of any applicable employ- ment retention plan described in paragraph (4) with respect to any participant. (3) Definitions For purposes of this subsection— (A) Plan includes arrangements, etc. The term ‘‘plan’’ includes any agreement or arrangement. (B) Substantial risk of forfeiture The rights of a person to compensation are subject to a substantial risk of forfeiture if such person’s rights to such compensation are conditioned upon the future performance of substantial services by any individual. (4) Employment retention plans For purposes of paragraph (2)(F)— (A) In general The portion of an applicable employment retention plan described in this paragraph with respect to any participant is that por- tion of the plan which provides benefits pay- able to the participant not in excess of twice the applicable dollar limit determined under subsection (e)(15). (B) Other rules (i) Limitation Paragraph (2)(F) shall only apply to the portion of the plan described in subpara- graph (A) for years preceding the year in Page 1590 TITLE 26—INTERNAL REVENUE CODE § 457 which such portion is paid or otherwise made available to the participant. (ii) Treatment A plan shall not be treated for purposes of this title as providing for the deferral of compensation for any year with respect to the portion of the plan described in sub- paragraph (A). (C) Applicable employment retention plan The term ‘‘applicable employment reten- tion plan’’ means an employment retention plan maintained by— (i) a local educational agency (as defined in section 8101 of the Elementary and Sec- ondary Education Act of 1965 (20 U.S.C. 7801)), or (ii) an education association which prin- cipally represents employees of 1 or more agencies described in clause (i) and which is described in section 501(c)(5) or (6) and exempt from taxation under section 501(a). (D) Employment retention plan The term ‘‘employment retention plan’’ means a plan to pay, upon termination of employment, compensation to an employee of a local educational agency or education association described in subparagraph (C) for purposes of— (i) retaining the services of the em- ployee, or (ii) rewarding such employee for the em- ployee’s service with 1 or more such agen- cies or associations. (g) Governmental plans must maintain set-asides for exclusive benefit of participants (1) In general A plan maintained by an eligible employer described in subsection (e)(1)(A) shall not be treated as an eligible deferred compensation plan unless all assets and income of the plan described in subsection (b)(6) are held in trust for the exclusive benefit of participants and their beneficiaries. (2) Taxability of trusts and participants For purposes of this title— (A) a trust described in paragraph (1) shall be treated as an organization exempt from taxation under section 501(a), and (B) notwithstanding any other provision of this title, amounts in the trust shall be in- cludible in the gross income of participants and beneficiaries only to the extent, and at the time, provided in this section. (3) Custodial accounts and contracts For purposes of this subsection, custodial accounts and contracts described in section 401(f) shall be treated as trusts under rules similar to the rules under section 401(f). (4) Death benefits under USERRA-qualified ac- tive military service A plan described in paragraph (1) shall not be treated as an eligible deferred compensa- tion plan unless such plan meets the require- ments of section 401(a)(37). (Added Pub. L. 95–600, title I, § 131(a), Nov. 6, 1978, 92 Stat. 2779; amended Pub. L. 96–222, title I, § 101(a)(4), Apr. 1, 1980, 94 Stat. 196; Pub. L. 98–369, div. A, title IV, § 491(d)(33), July 18, 1984, 98 Stat. 851; Pub. L. 99–514, title XI, § 1107(a), Oct. 22, 1986, 100 Stat. 2426; Pub. L. 100–647, title I, § 1011(e)(1), (2), (9), (10), title VI, §§ 6064(a)–(c), 6071(c), Nov. 10, 1988, 102 Stat. 3460, 3461, 3700, 3701, 3705; Pub. L. 101–239, title VII, §§ 7811(g)(4), (5), 7816(j), Dec. 19, 1989, 103 Stat. 2409, 2421; Pub. L. 102–318, title V, § 521(b)(26), July 3, 1992, 106 Stat. 312; Pub. L. 104–188, title I, §§ 1421(b)(3)(C), 1444(b)(2), (3), 1447(a), (b), 1448(a), (b), 1458(a), Aug. 20, 1996, 110 Stat. 1796, 1810, 1812, 1813, 1819; Pub. L. 105–34, title X, § 1071(a)(2), Aug. 5, 1997, 111 Stat. 948; Pub. L. 107–16, title VI, §§ 611(d)(3)(B), (e), 615(a), 632(c)(1), 641(a)(1)(A)–(C), 646(a)(3), 647(b), 648(b), 649(a), (b), June 7, 2001, 115 Stat. 98, 102, 115, 118, 119, 126–128; Pub. L. 107–147, title IV, § 411(o)(9), (p)(5), Mar. 9, 2002, 116 Stat. 49, 51; Pub. L. 109–280, title VIII, §§ 829(a)(4), 845(b)(3), title XI, § 1104(a)(1), (b), Aug. 17, 2006, 120 Stat. 1002, 1015, 1058, 1059; Pub. L. 110–245, title I, § 104(c)(3), June 17, 2008, 122 Stat. 1627; Pub. L. 113–295, div. A, title II, § 221(a)(57)(H), Dec. 19, 2014, 128 Stat. 4047; Pub. L. 114–95, title IX, § 9215(uu)(2), Dec. 10, 2015, 129 Stat. 2183; Pub. L. 115–97, title I, § 13612(a)–(c), Dec. 22, 2017, 131 Stat. 2165; Pub. L. 115–141, div. U, title IV, § 401(a)(112), Mar. 23, 2018, 132 Stat. 1189; Pub. L. 116–94, div. M, § 104(b), div. O, title I, § 109(d), Dec. 20, 2019, 133 Stat. 3095, 3151; Pub. L. 117–328, div. T, title I, § 110(f), title III, §§ 306(a), 312(c), 334(b)(5), title VI, § 603(b)(2), Dec. 29, 2022, 136 Stat. 5293, 5343, 5348, 5370, 5392.) INFLATION ADJUSTED ITEMS FOR CERTAIN YEARS For inflation adjustment of certain items in this section, see Internal Revenue Notices listed in a table under section 401 of this title. AMENDMENT OF SUBSECTION (d)(1)(A) Pub. L. 117–328, div. T, title III, § 334(b)(5), (e), Dec. 29, 2022, 136 Stat. 5370, 5372, provided that, applicable to distributions made after the date which is 3 years after Dec. 29, 2022, sub- section (d)(1)(A) of this section is amended by striking ‘‘or’’ at the end of clause (iii), by strik- ing the comma at the end of clause (iv) and in- serting ‘‘, or’’, and by adding at the end the following new clause: ‘‘(v) as provided in section 401(a)(39),’’. See 2022 Amendment note below. Editorial Notes REFERENCES IN TEXT Section 8101 of the Elementary and Secondary Edu- cation Act of 1965, referred to in subsec. (e)(11)(D)(ii)(I), is classified to section 7801 of Title 20, Education. AMENDMENTS 2022—Subsec. (b). Pub. L. 117–328, § 110(f), inserted at end of concluding provisions ‘‘A plan which is estab- lished and maintained by an employer which is de- scribed in subsection (e)(1)(A) shall not be treated as failing to meet the requirements of this subsection solely because the plan, or another plan maintained by the employer which meets the requirements of section 401(a) or 403(b), provides for matching contributions on account of qualified student loan payments as de- scribed in section 401(m)(13).’’ Subsec. (b)(4). Pub. L. 117–328, § 306(a), amended par. (4) generally. Prior to amendment, par. (4) read as fol- lows: ‘‘which provides that compensation will be de- Page 1591 TITLE 26—INTERNAL REVENUE CODE § 457 ferred for any calendar month only if an agreement providing for such deferral has been entered into before the beginning of such month,’’. Subsec. (d)(1)(A)(v). Pub. L. 117–328, § 334(b)(5), added cl. (v). Subsec. (d)(4). Pub. L. 117–328, § 312(c), added par. (4). Subsec. (e)(18)(A)(ii). Pub. L. 117–328, § 603(b)(2), in- serted ‘‘the lesser of any designated Roth contributions made by the participant to the plan or’’ before ‘‘the ap- plicable dollar amount’’. 2019—Subsec. (d)(1)(A)(i). Pub. L. 116–94, § 104(b), in- serted ‘‘(in the case of a plan maintained by an em- ployer described in subsection (e)(1)(A), age 591⁄2)’’ be- fore comma at end. Subsec. (d)(1)(A)(iv). Pub. L. 116–94, § 109(d)(1), added cl. (iv). Subsec. (d)(1)(D). Pub. L. 116–94, § 109(d)(2), added sub- par. (D). 2018—Subsec. (f)(4)(C)(i). Pub. L. 115–141 substituted ‘‘section 8101’’ for ‘‘section 9101’’ and ‘‘(20 U.S.C. 7801)),’’ for ‘‘(20 U.S.C. 7801),’’. 2017—Subsec. (e)(11)(B)(ii). Pub. L. 115–97, § 13612(a), substituted ‘‘$6,000’’ for ‘‘$3,000’’. Subsec. (e)(11)(B)(iii). Pub. L. 115–97, § 13612(b), added cl. (iii). Subsec. (e)(11)(B)(iv). Pub. L. 115–97, § 13612(c), added cl. (iv). 2015—Subsec. (e)(11)(D)(ii)(I). Pub. L. 114–95 sub- stituted ‘‘section 8101 of the Elementary and Secondary Education Act of 1965’’ for ‘‘section 9101 of the Elemen- tary and Secondary Education Act of 1965 (20 U.S.C. 7801)’’. 2014—Subsec. (e)(15)(A). Pub. L. 113–295 substituted ‘‘is $15,000.’’ for ‘‘shall be the amount determined in ac- cordance with the following table:’’ and struck out table at end listing applicable dollar amounts for tax- able years beginning in 2002. 2008—Subsec. (g)(4). Pub. L. 110–245 added par. (4). 2006—Subsec. (a)(3). Pub. L. 109–280, § 845(b)(3), added par. (3). Subsec. (e)(11)(D). Pub. L. 109–280, § 1104(a)(1), added subpar. (D). Subsec. (e)(16)(B). Pub. L. 109–280, § 829(a)(4), sub- stituted ‘‘, (9), and (11)’’ for ‘‘and (9)’’. Subsec. (f)(2)(F). Pub. L. 109–280, § 1104(b)(1), added subpar. (F). Subsec. (f)(4). Pub. L. 109–280, § 1104(b)(2), added par. (4). 2002—Subsec. (e)(5). Pub. L. 107–147, § 411(p)(5), reen- acted heading without change and amended text gen- erally. Prior to amendment, text read as follows: ‘‘The term ‘includible compensation’ means compensation for service performed for the employer which (taking into account the provisions of this section and other provisions of this chapter) is currently includible in gross income.’’ Subsec. (e)(18). Pub. L. 107–147, § 411(o)(9), added par. (18). 2001—Subsec. (a). Pub. L. 107–16, § 649(b)(1), reenacted heading without change and amended text of subsec. (a) generally. Prior to amendment, text read as follows: ‘‘In the case of a participant in an eligible deferred compensation plan, any amount of compensation de- ferred under the plan, and any income attributable to the amounts so deferred, shall be includible in gross in- come only for the taxable year in which such com- pensation or other income is paid or otherwise made available to the participant or other beneficiary.’’ Subsec. (b)(2). Pub. L. 107–16, § 641(a)(1)(B), inserted ‘‘(other than rollover amounts)’’ after ‘‘taxable year’’ in introductory provisions. Subsec. (b)(2)(A). Pub. L. 107–16, § 611(e)(1)(A), sub- stituted ‘‘the applicable dollar amount’’ for ‘‘$7,500’’. Subsec. (b)(2)(B). Pub. L. 107–16, § 632(c)(1), substituted ‘‘100 percent’’ for ‘‘331⁄3 percent’’. Subsec. (b)(3)(A). Pub. L. 107–16, § 611(e)(1)(B), sub- stituted ‘‘twice the dollar amount in effect under sub- section (b)(2)(A)’’ for ‘‘$15,000’’. Subsec. (c). Pub. L. 107–16, § 615(a), amended heading and text of subsec. (c) generally, substituting present provisions for provisions which stated that the max- imum amount of compensation that an individual could defer under subsec. (a) during any taxable year could not exceed the applicable dollar amount, as modi- fied by any adjustment provided under subsec. (b)(3), and provided for coordination with certain other defer- rals. Subsec. (c)(1). Pub. L. 107–16, § 611(e)(1)(A), substituted ‘‘the applicable dollar amount’’ for ‘‘$7,500’’. Subsec. (c)(2). Pub. L. 107–16, § 611(d)(3)(B), substituted ‘‘402(g)(7)(A)(iii)’’ for ‘‘402(g)(8)(A)(iii)’’ in concluding provisions. Subsec. (d)(1). Pub. L. 107–16, § 641(a)(1)(C), added sub- par. (C) and concluding provisions. Subsec. (d)(1)(A)(ii). Pub. L. 107–16, § 646(a)(3), sub- stituted ‘‘has a severance from employment’’ for ‘‘is separated from service’’. Subsec. (d)(2). Pub. L. 107–16, § 649(a), reenacted head- ing without change and amended text of par. (2) gen- erally, substituting present provisions for provisions which stated that a plan would meet the minimum dis- tribution requirements of this par. if plan met the re- quirements of section 401(a)(9), if plan met additional distribution requirements in the case of a deceased par- ticipant, and if any distribution payable over a period of more than 1 year would only be made in substan- tially nonincreasing amounts. Subsec. (d)(3). Pub. L. 107–16, § 649(b)(2)(B), added par. (3). Subsec. (e)(9). Pub. L. 107–16, § 649(b)(2)(A), in heading substituted ‘‘Benefits of tax exempt organization plans not treated as made available by reason of certain elec- tions, etc.’’ for ‘‘Benefits not treated as made available by reason of certain elections, etc.’’ and inserted intro- ductory provisions. Subsec. (e)(9)(A)(i). Pub. L. 107–16, § 648(b), substituted ‘‘the portion of such amount which is not attributable to rollover contributions (as defined in section 411(a)(11)(D))’’ for ‘‘such amount’’. Subsec. (e)(15). Pub. L. 107–16, § 611(e)(2), amended heading and text of par. (15) generally. Prior to amend- ment, text read as follows: ‘‘The Secretary shall adjust the $7,500 amount specified in subsections (b)(2) and (c)(1) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter ending September 30, 1994, and any increase under this paragraph which is not a mul- tiple of $500 shall be rounded to the next lowest mul- tiple of $500.’’ Subsec. (e)(16). Pub. L. 107–16, § 641(a)(1)(A), added par. (16). Subsec. (e)(17). Pub. L. 107–16, § 647(b), added par. (17). 1997—Subsec. (e)(9)(A). Pub. L. 105–34 substituted ‘‘dollar limit’’ for ‘‘$3,500’’ in heading and ‘‘the dollar limit under section 411(a)(11)(A)’’ for ‘‘$3,500’’ in cl. (i). 1996—Subsec. (b)(6). Pub. L. 104–188, § 1448(b), inserted ‘‘except as provided in subsection (g),’’ before ‘‘which provides that’’ in introductory provisions. Subsec. (c)(2)(B)(i). Pub. L. 104–188, § 1421(b)(3)(C), sub- stituted ‘‘section 402(h)(1)(B) or (k)’’ for ‘‘section 402(h)(1)(B)’’. Subsec. (e)(9). Pub. L. 104–188, § 1447(a), amended par. (9) generally. Prior to amendment, par. (9) read as fol- lows: ‘‘BENEFITS NOT TREATED AS MADE AVAILABLE BY REASON OF CERTAIN ELECTIONS.—If— ‘‘(A) the total amount payable to a participant under the plan does not exceed $3,500, and ‘‘(B) no additional amounts may be deferred under the plan with respect to the participant, the amount payable to the participant under the plan shall not be treated as made available merely because such participant may elect to receive a lump sum pay- able after separation from service and within 60 days of the election.’’ Subsec. (e)(11). Pub. L. 104–188, § 1458(a), amended par. (11) generally. Prior to amendment, par. (11) read as follows: ‘‘CERTAIN PLANS EXCEPTED.—Any bona fide va- cation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plan shall be treat- ed as a plan not providing for the deferral of compensa- tion.’’ Page 1592 TITLE 26—INTERNAL REVENUE CODE § 457 Subsec. (e)(14). Pub. L. 104–188, § 1444(b)(2), added par. (14). Subsec. (e)(15). Pub. L. 104–188, § 1447(b), added par. (15). Subsec. (f)(2)(E). Pub. L. 104–188, § 1444(b)(3), added subpar. (E). Subsec. (g). Pub. L. 104–188, § 1448(a), added subsec. (g). 1992—Subsec. (c)(2)(B)(i). Pub. L. 102–318 substituted ‘‘402(e)(3)’’ for ‘‘402(a)(8)’’. 1989—Subsec. (d)(1)(A)(iii). Pub. L. 101–239, § 7811(g)(4), substituted ‘‘, and’’ for period at end. Subsec. (d)(2)(B)(i)(I). Pub. L. 101–239, § 7811(g)(5), in- serted ‘‘and’’ at end. Subsec. (e)(13). Pub. L. 101–239, § 7816(j), substituted ‘‘Special rule for churches’’ for ‘‘Exception for church plans’’ in heading and amended text generally. Prior to amendment, text read as follows: ‘‘The term ‘eligible deferred compensation plan’ shall not include a plan maintained by a church for church employees. For pur- poses of this paragraph, the term ‘church’ has the meaning given such term by section 3121(w)(3)(A), in- cluding a qualified church-controlled organization (as defined in section 3121(w)(3)(B)).’’ 1988—Subsec. (c)(2). Pub. L. 100–647, § 1011(e)(1), struck out ‘‘and paragraphs (2) and (3) of subsection (b)’’ after ‘‘of this subsection’’. Pub. L. 100–647, § 6071(c), substituted ‘‘rural coopera- tive plan’’ for ‘‘rural electric cooperative plan’’ in last sentence. Subsec. (d)(1)(A). Pub. L. 100–647, § 1011(e)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: ‘‘the plan provides that amounts pay- able under the plan will be made available to partici- pants or other beneficiaries not earlier than when the participant is separated from service with the employer or is faced with an unforeseeable emergency (deter- mined in the manner prescribed by the Secretary by regulation), and’’. Subsec. (d)(2)(B)(i)(I). Pub. L. 100–647, § 1011(e)(10), amended subcl. (I) generally. Prior to amendment, subcl. (I) read as follows: ‘‘at least 2⁄3 of the total amount payable with respect to the participant will be paid during the life expectancy of such participant (de- termined as of the commencement of the distribution), and’’. Subsec. (d)(10). Pub. L. 100–647, § 6064(a)(2), amended subsec. (d), as in effect on the day before the date of en- actment of Pub. L. 99–514 (Oct. 22, 1986), by adding par. (10) reading as follows: ‘‘CERTAIN PLANS EXCEPTED.— Any bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plan shall be treated as a plan not providing for the de- ferral of compensation.’’ Subsec. (d)(11). Pub. L. 100–647, § 6064(b)(2), amended subsec. (d), as in effect on the day before the date of en- actment of Pub. L. 99–514 (Oct. 22, 1986), by adding par. (11) reading as follows: ‘‘EXCEPTION FOR NONELECTIVE DEFERRED COMPENSATION OF NONEMPLOYEES.— ‘‘(A) IN GENERAL.—This section shall not apply to nonelective deferred compensation attributable to services not performed as an employee. ‘‘(B) NONELECTIVE DEFERRED COMPENSATION.—For purposes of subparagraph (a), deferred compensation shall be treated as nonelective only if all individuals (other than those who have not satisfied any applica- ble initial service requirement) with the same rela- tionship to the payor are covered under the same plan with no individual variations or options under the plan.’’ Subsec. (e)(9). Pub. L. 100–647, § 1011(e)(9), inserted ‘‘after separation from service and’’ after ‘‘lump sum payable’’ in concluding provisions. Subsec. (e)(11). Pub. L. 100–647, § 6064(a)(1), added par. (11). Subsec. (e)(12). Pub. L. 100–647, § 6064(b)(1), added par. (12). Subsec. (e)(13). Pub. L. 100–647, § 6064(c), added par. (13). 1986—Pub. L. 99–514 amended section generally, sub- stituting ‘‘Deferred compensation plans of State and local governments and tax-exempt organizations’’ for ‘‘Deferred compensation plans with respect to service for State and local governments’’ as section catchline and revising and restating as subsecs. (a) to (c), (e), and (f) provisions formerly contained in subsecs. (a) to (e) and adding provisions comprising subsec. (d). 1984—Subsec. (e)(2). Pub. L. 98–369, § 491(d)(33), struck out subpar. (C) which provided that par. (1) of this sub- section not apply to a qualified bond purchase plan de- scribed in section 405(a), and redesignated subpars. (D) and (E) as (C) and (D), respectively. 1980—Subsec. (d)(9)(B). Pub. L. 96–222 in cl. (i) struck out ‘‘described in section 501(c)(12)’’ after ‘‘any organi- zation’’ and substituted ‘‘electric service on a mutual or cooperative basis’’ for ‘‘electric service’’ and in cl. (ii) substituted ‘‘paragraph (4) or (6) of section 501(a)’’ for ‘‘section 501(c)(6)’’ and ‘‘at least 80 percent of the members’’ for ‘‘all the members’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2022 AMENDMENT Amendment by section 110(f) of Pub. L. 117–328 appli- cable to contributions made for plan years beginning after Dec. 31, 2023, see section 110(h) of Pub. L. 117–328, set out as a note under section 401 of this title. Pub. L. 117–328, div. T, title III, § 306(b), Dec. 29, 2022, 136 Stat. 5343, provided that: ‘‘The amendment made by this section [amending this section] shall apply to tax- able years beginning after the date of the enactment of this Act [Dec. 29, 2022].’’ Amendment by section 312(c) of Pub. L. 117–328 appli- cable to plan years beginning after Dec. 29, 2022, see section 312(d) of Pub. L. 117–328, set out as a note under section 401 of this title. Amendment by section 334(b)(5) of Pub. L. 117–328 ap- plicable to distributions made after the date which is 3 years after Dec. 29, 2022, see section 334(e) of Pub. L. 117–328, set out as a note under section 72 of this title. Amendment by section 603(b)(2) of Pub. L. 117–328 ap- plicable to taxable years beginning after Dec. 31, 2023, see section 603(c) of Pub. L. 117–328, set out as a note under section 402 of this title. EFFECTIVE DATE OF 2019 AMENDMENT Amendment by section 104(b) of Pub. L. 116–94 appli- cable to plan years beginning after Dec. 31, 2019, see section 104(c) of Pub. L. 116–94, set out as a note under section 401 of this title. Amendment by section 109(d) of Pub. L. 116–94 appli- cable to plan years beginning after Dec. 31, 2019, see section 109(e) of Pub. L. 116–94, set out as a note under section 401 of this title. EFFECTIVE DATE OF 2017 AMENDMENT Pub. L. 115–97, title I, § 13612(d), Dec. 22, 2017, 131 Stat. 2166, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2017.’’ EFFECTIVE DATE OF 2015 AMENDMENT Amendment by Pub. L. 114–95 effective Dec. 10, 2015, except with respect to certain noncompetitive pro- grams and competitive programs, see section 5 of Pub. L. 114–95, set out as a note under section 6301 of Title 20, Education. EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title. EFFECTIVE DATE OF 2008 AMENDMENT Amendment by Pub. L. 110–245 applicable with re- spect to deaths and disabilities occurring on or after Jan. 1, 2007, see section 104(d)(1) of Pub. L. 110–245, set out as a note under section 401 of this title. EFFECTIVE DATE OF 2006 AMENDMENT Amendment by section 829(a)(4) of Pub. L. 109–280 ap- plicable to distributions after Dec. 31, 2006, see section Page 1593 TITLE 26—INTERNAL REVENUE CODE § 457 829(b) of Pub. L. 109–280, set out as a note under section 402 of this title. Amendment by section 845(b)(3) of Pub. L. 109–280 ap- plicable to distributions in taxable years beginning after Dec. 31, 2006, see section 845(c) of Pub. L. 109–280, set out as a note under section 402 of this title. Pub. L. 109–280, title XI, § 1104(d), Aug. 17, 2006, 120 Stat. 1060, as amended by Pub. L. 110–458, title I, § 111(a), Dec. 23, 2008, 122 Stat. 5113, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [amending this section and sections 623 and 1002 of Title 29, Labor] shall take effect on the date of the en- actment of this Act [Aug. 17, 2006]. ‘‘(2) TAX AMENDMENTS.—The amendments made by subsections (a)(1) and (b) [amending this section] shall apply to taxable years ending after the date of the en- actment of this Act [Aug. 17, 2006]. ‘‘(3) ERISA AMENDMENTS.—The amendment made by subsection (c) [amending section 1002 of Title 29, Labor] shall apply to plan years ending after the date of the enactment of this Act [Aug. 17, 2006]. ‘‘(4) CONSTRUCTION.—Nothing in the amendments made by this section [amending this section and sec- tions 623 and 1002 of Title 29, Labor] shall alter or affect the construction of the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.], or the Age Discrimination in Employment Act of 1967 [29 U.S.C. 621 et seq.] as ap- plied to any plan, arrangement, or conduct to which such amendments do not apply.’’ EFFECTIVE DATE OF 2002 AMENDMENT Amendment by Pub. L. 107–147 effective as if included in the provisions of the Economic Growth and Tax Re- lief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 411(x) of Pub. L. 107–147, set out as a note under section 25B of this title. EFFECTIVE DATE OF 2001 AMENDMENT Amendment by section 611(d)(3)(B), (e) of Pub. L. 107–16 applicable to years beginning after Dec. 31, 2001, see section 611(i)(1) of Pub. L. 107–16, set out as a note under section 415 of this title. Pub. L. 107–16, title VI, § 615(b), June 7, 2001, 115 Stat. 102, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to years beginning after December 31, 2001.’’ Pub. L. 107–16, title VI, § 632(c)(2), June 7, 2001, 115 Stat. 115, provided that: ‘‘The amendment made by this subsection [amending this section] shall apply to years beginning after December 31, 2001.’’ Amendment by section 641(a)(1)(A)–(C) of Pub. L. 107–16 applicable to distributions after Dec. 31, 2001, see section 641(f)(1) of Pub. L. 107–16, set out as a note under section 402 of this title. Amendment by section 646(a)(3) of Pub. L. 107–16 ap- plicable to distributions after Dec. 31, 2001, see section 646(b) of Pub. L. 107–16, set out as a note under section 401 of this title. Amendment by section 647(b) of Pub. L. 107–16 appli- cable to trustee-to-trustee transfers after Dec. 31, 2001, see section 647(c) of Pub. L. 107–16, set out as a note under section 403 of this title. Amendment by section 648(b) of Pub. L. 107–16 appli- cable to distributions after Dec. 31, 2001, see section 648(c) of Pub. L. 107–16, set out as a note under section 411 of this title. Pub. L. 107–16, title VI, § 649(c), June 7, 2001, 115 Stat. 128, provided that: ‘‘The amendments made by sub- sections (a) and (b) [amending this section] shall apply to distributions after December 31, 2001.’’ EFFECTIVE DATE OF 1997 AMENDMENT Amendment by Pub. L. 105–34 applicable to plan years beginning after Aug. 5, 1997, see section 1071(c) of Pub. L. 105–34, set out as a note under section 411 of this title. EFFECTIVE DATE OF 1996 AMENDMENT Amendment by section 1421(b)(3)(C) of Pub. L. 104–188 applicable to taxable years beginning after Dec. 31, 1996, see section 1421(e) of Pub. L. 104–188, set out as a note under section 72 of this title. Amendment by section 1444(b)(2), (3) of Pub. L. 104–188 applicable to years beginning after Dec. 31, 1994, see section 1444(e) of Pub. L. 104–188, set out as a note under section 415 of this title. Pub. L. 104–188, title I, § 1447(c), Aug. 20, 1996, 110 Stat. 1812, provided that: ‘‘The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1996.’’ Pub. L. 104–188, title I, § 1448(c), Aug. 20, 1996, 110 Stat. 1813, provided that: ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to assets and income described in section 457(b)(6) of the Internal Revenue Code of 1986 held by a plan on and after the date of the enactment of this Act [Aug. 20, 1996]. ‘‘(2) TRANSITION RULE.—In the case of a plan in exist- ence on the date of the enactment of this Act, a trust need not be established by reason of the amendments made by this section before January 1, 1999.’’ Pub. L. 104–188, title I, § 1458(c)(1), Aug. 20, 1996, 110 Stat. 1820, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to accruals of length of service awards after December 31, 1996.’’ EFFECTIVE DATE OF 1992 AMENDMENT Amendment by Pub. L. 102–318 applicable to distribu- tions after Dec. 31, 1992, see section 521(e) of Pub. L. 102–318, set out as a note under section 402 of this title. EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Pub. L. 100–647, title I, § 1011(e)(9), Nov. 10, 1988, 102 Stat. 3461, provided that the amendment made by that section is effective for years beginning after Dec. 31, 1988. Amendment by section 1011(e)(1), (2), (10) of Pub. L. 100–647 effective, except as otherwise provided, as if in- cluded in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. Pub. L. 100–647, title VI, § 6064(d), Nov. 10, 1988, 102 Stat. 3701, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1987. ‘‘(2) EXCEPTION FOR CERTAIN COLLECTIVELY BARGAINED PLANS.— ‘‘(A) IN GENERAL.—Section 457 of the 1986 Code (as in effect before and after the amendments made by section 1107 of the Reform Act [Pub. L. 99–514]) shall not apply to nonelective deferred compensation pro- vided under a plan in existence on December 31, 1987, and maintained pursuant to a collective bargaining agreement. ‘‘(B) NONELECTIVE PLAN.—For purposes of this para- graph, a nonelective plan is a plan which covers a broad group of employees and under which the cov- ered employees earn nonelective deferred compensa- tion under a definite, fixed and uniform benefit for- mula. ‘‘(C) TERMINATION.—This paragraph shall cease to apply to a plan as of the effective date of the first material modification of the plan agreed to after De- cember 31, 1987. ‘‘(3) TREATMENT OF CERTAIN NONELECTIVE DEFERRED COMPENSATION.—Section 457 of the 1986 Code shall not apply to amounts deferred under a nonelective deferred Page 1594 TITLE 26—INTERNAL REVENUE CODE § 457 compensation plan maintained by an eligible employer described in section 457(e)(1)(A) of the 1986 Code (as in effect after the Reform Act [Pub. L. 99–514])— ‘‘(A) if such amounts were deferred from periods be- fore July 14, 1988, or ‘‘(B) if— ‘‘(i) such amounts are deferred from periods on or after such date pursuant to an agreement which— ‘‘(I) was in writing on such date, and ‘‘(II) on such date provides for a deferral for each taxable year covered by the agreement of a fixed amount or of an amount determined pursu- ant to a fixed formula, and ‘‘(ii) the individual with respect to whom the de- ferral is made was covered under such agreement on such date. Subparagraph (B) shall not apply to any taxable year ending after the date on which any modification of the amount or formula described in subparagraph (B)(i)(II) agreed to in writing before January 1, 1989, is effective. The preceding sentence shall not apply to a modifica- tion agreed to in writing before January 1, 1989, which does not increase any benefit of a participant. Amounts described in the first sentence of this paragraph shall be taken into account for purposes of applying section 457 of the 1986 Code to other amounts deferred under any eligible deferred compensation plan. ‘‘(4) STUDY.—The Secretary of the Treasury or his delegate shall conduct a study on the tax treatment of deferred compensation paid by State and local govern- ments and tax-exempt organizations (including de- ferred compensation paid to independent contractors). Not later than January 1, 1990, the Secretary shall sub- mit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on the study conducted under this paragraph together with such recommendations as he may deem advisable.’’ [The due date for the report on the study referred to in section 6064(d)(4) of Pub. L. 100–647, set out above, ex- tended to Jan. 1, 1992, by Pub. L. 101–508, title XI, § 11831(b), Nov. 5, 1990, 104 Stat. 1388–559.] Amendment by section 6071(c) of Pub. L. 100–647 appli- cable to taxable years beginning after Nov. 10, 1988, see section 6071(d) of Pub. L. 100–647, set out as a note under section 401 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Pub. L. 99–514, title XI, § 1107(c), Oct. 22, 1986, 100 Stat. 2430, as amended by Pub. L. 100–647, title I, § 1011(e)(6), (7), Nov. 10, 1988, 102 Stat. 3461, provided that: ‘‘(1) IN GENERAL.—Except as provided in this sub- section, the amendments made by this section [amend- ing this section] shall apply to taxable years beginning after December 31, 1988. ‘‘(2) TRANSFERS AND CASH-OUTS.—Paragraphs (9) and (10) of section 457(e) of the Internal Revenue Code of 1986 (as amended by this section) shall apply to taxable years beginning after December 31, 1986. ‘‘(3) APPLICATION TO TAX-EXEMPT ORGANIZATIONS.— ‘‘(A) IN GENERAL.—Except as provided in subpara- graph (B), the application of section 457 of the Inter- nal Revenue Code of 1986 by reason of the amend- ments made by this section to deferred compensation plans established and maintained by organizations exempt from tax shall apply to taxable years begin- ning after December 31, 1986. ‘‘(B) EXISTING DEFERRALS AND ARRANGEMENTS.—Sec- tion 457 of such Code shall not apply to amounts de- ferred under a plan described in subparagraph (A) which— ‘‘(i) were deferred from taxable years beginning before January 1, 1987, or ‘‘(ii) are deferred from taxable years beginning after December 31, 1986, pursuant to an agreement which— ‘‘(I) was in writing on August 16, 1986, ‘‘(II) on such date provides for a deferral for each taxable year covered by the agreement of a fixed amount or of an amount determined pursu- ant to a fixed formula. Clause (ii) shall not apply to any taxable year ending after the date on which any modification to the amount or formula described in subclause (II) is effec- tive. Amounts described in the first sentence shall be taken into account for applying section 457 to other amounts deferred under any deferred compensation plan. This subparagraph shall only apply to individ- uals who were covered under the plan and agreement on August 16, 1986. ‘‘(4) DEFERRED COMPENSATION PLANS FOR STATE JUDGES.—The amendments made by this section shall not apply to any qualified State judicial plan (as de- fined in section 131(c)(3)(B) of the Revenue Act of 1978 [set out as a note below] as amended by section 252 of the Tax Equity and Fiscal Responsibility Act of 1982). ‘‘(5) SPECIAL RULE FOR CERTAIN DEFERRED COMPENSA- TION PLANS.—The amendments made by this section shall not apply— ‘‘(A) to employees on August 16, 1986, of a nonprofit corporation organized under the laws of the State of Alabama maintaining a deferred compensation plan with respect to which the Internal Revenue Service issued a ruling dated March 17, 1976, that the plan would not affect the tax-exempt status of the cor- poration, or ‘‘(B) to to [sic] individuals eligible to participate on August 16, 1986, in a deferred compensation plan with respect to which a letter dated November 6, 1975, sub- mitted the original plan to the Internal Revenue Service, an amendment was submitted on November 19, 1975, and the Internal Revenue Service responded with a letter dated December 24, 1975, but only with respect to deferrals under such plan.’’ EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–369 applicable to obliga- tions issued after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 98–369, set out as a note under section 62 of this title. EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–222 effective, except as oth- erwise provided, as if it had been included in the provi- sions of the Revenue Act of 1978, Pub. L. 95–600, to which such amendment relates, see section 201 of Pub. L. 96–222, set out as a note under section 32 of this title. EFFECTIVE DATE Pub. L. 95–600, title I, § 131(c)(1), Nov. 6, 1978, 92 Stat. 2782, provided that: ‘‘The amendments made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1978.’’ ELIGIBILITY FOR PARTICIPATION IN RETIREMENT PLANS Pub. L. 109–280, title VIII, § 825, Aug. 17, 2006, 120 Stat. 999, provided that: ‘‘An individual shall not be pre- cluded from participating in an eligible deferred com- pensation plan by reason of having received a distribu- tion under section 457(e)(9) of the Internal Revenue Code of 1986, as in effect prior to the enactment of the Small Business Job Protection Act of 1996 [Pub. L. 104–188, Aug. 20, 1996].’’ PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1998 For provisions directing that if any amendments made by subtitle D [§§ 1401–1465] of title I of Pub. L. 104–188 require an amendment to any plan or annuity contract, such amendment shall not be required to be made before the first day of the first plan year begin- ning on or after Jan. 1, 1998, see section 1465 of Pub. L. 104–188, set out as a note under section 401 of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1994 For provisions directing that if any amendments made by subtitle B [§§ 521–523] of title V of Pub. L. 102–318 require an amendment to any plan, such plan Page 1595 TITLE 26—INTERNAL REVENUE CODE § 457A amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1994, see section 523 of Pub. L. 102–318, set out as a note under section 401 of this title. PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1100–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. TRANSITIONAL RULES Pub. L. 95–600, title I, § 131(c)(2), Nov. 6, 1978, 92 Stat. 2782, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(A) IN GENERAL.—In the case of any taxable year be- ginning after December 31, 1978, and before January 1, 1982— ‘‘(i) any amount of compensation deferred under a plan of a State providing for a deferral of compensa- tion (other than a plan described in section 457(e)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]), and any income attributable to the amounts so deferred, shall be includible in gross income only for the taxable year in which such compensation or other income is paid or otherwise made available to the participant or other beneficiary, but ‘‘(ii) the maximum amount of the compensation of any one individual which may be excluded from gross income by reason of clause (i) and by reason of sec- tion 457(a) of such Code during any such taxable year shall not exceed the lesser of— ‘‘(I) $7,500, or ‘‘(II) 331⁄3 percent of the participant’s includible compensation. ‘‘(B) APPLICATION OF CATCH-UP PROVISIONS IN CERTAIN CASES.—If, in the case of any participant for any tax- able year, all of the plans are eligible State deferred compensation plans, then clause (ii) of subparagraph (A) of this paragraph shall be applied with the modi- fication provided by paragraph (3) of section 457(b) of such Code. ‘‘(C) APPLICATIONS OF CERTAIN COORDINATION PROVI- SIONS.—In applying clause (ii) of subparagraph (A) of this paragraph and section 403(b)(2)(A)(ii) of such Code, rules similar to the rules of section 457(c)(2) of such Code shall apply. ‘‘(D) MEANING OF TERMS.—Except as otherwise pro- vided in this paragraph, terms used in this paragraph shall have the same meaning as when used in section 457 of such Code.’’ DEFERRED COMPENSATION PLANS FOR STATE JUDGES Pub. L. 95–600, title I, § 131(c)(3), as added by Pub. L. 97–248, title II, § 252, Sept. 3, 1982, 96 Stat. 532, and amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ‘‘(A) IN GENERAL.—The amendments made by this sec- tion [enacting this section and provisions set out as notes under this section] shall not apply to any quali- fied State judicial plan. ‘‘(B) QUALIFIED STATE JUDICIAL PLAN.—For purposes of subparagraph (A), the term ‘qualified State judicial plan’ means any retirement plan of a State for the ex- clusive benefit of judges or their beneficiaries if— ‘‘(i) such plan has been continuously in existence since December 31, 1978, ‘‘(ii) under such plan, all judges eligible to benefit under the plan— ‘‘(I) are required to participate, and ‘‘(II) are required to contribute the same fixed percentage of their basic or regular rate of com- pensation as judge, ‘‘(iii) under such plan, no judge has an option as to contributions or benefits the exercise of which would affect the amount of includible compensation, ‘‘(iv) the retirement payments of a judge under the plan are a percentage of the compensation of judges of that State holding similar positions, and ‘‘(v) the plan during any year does not pay benefits with respect to any participant which exceed the lim- itations of section 415(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954].’’ § 457A. Nonqualified deferred compensation from certain tax indifferent parties (a) In general Any compensation which is deferred under a nonqualified deferred compensation plan of a nonqualified entity shall be includible in gross income when there is no substantial risk of for- feiture of the rights to such compensation. (b) Nonqualified entity For purposes of this section, the term ‘‘non- qualified entity’’ means— (1) any foreign corporation unless substan- tially all of its income is— (A) effectively connected with the conduct of a trade or business in the United States, or (B) subject to a comprehensive foreign in- come tax, and (2) any partnership unless substantially all of its income is allocated to persons other than— (A) foreign persons with respect to whom such income is not subject to a comprehen- sive foreign income tax, and (B) organizations which are exempt from tax under this title. (c) Determinability of amounts of compensation (1) In general If the amount of any compensation is not de- terminable at the time that such compensa- tion is otherwise includible in gross income under subsection (a)— (A) such amount shall be so includible in gross income when determinable, and (B) the tax imposed under this chapter for the taxable year in which such compensa- tion is includible in gross income shall be in- creased by the sum of— (i) the amount of interest determined under paragraph (2), and (ii) an amount equal to 20 percent of the amount of such compensation. (2) Interest For purposes of paragraph (1)(B)(i), the in- terest determined under this paragraph for any taxable year is the amount of interest at the underpayment rate under section 6621 plus 1 percentage point on the underpayments that would have occurred had the deferred com- pensation been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such de- ferred compensation is not subject to a sub- stantial risk of forfeiture. (d) Other definitions and special rules For purposes of this section— (1) Substantial risk of forfeiture (A) In general The rights of a person to compensation shall be treated as subject to a substantial