Section 457 deferred compensation plans, state and local governments

Deferred compensation, U.S. state and local governments

The Treasury Department and IRS today released for publication in the Federal Register a notice of proposed rulemaking (REG- 147196-07) under section 457 with respect to the tax rules for compensation that is deferred under plans established and maintained by state or local governments or other tax-exempt organizations.

Related content

Today’s proposed regulations [PDF 300 KB] address when and what amounts deferred under a section 457 plan are includible in income. The types of plans not subject to these rules are also discussed. 

The proposed regulations will be published in the Federal Register on June 22, 2016. A public hearing on these regulations has been scheduled for October 18, 2016. Comments or requests for topics to be discussed at the hearing are due by a date that is 90 days after June 22, 2016.

Overview

As explained in the preamble, today’s proposed regulations:

  • Make certain changes to final regulations (2003) under sections 457(a), 457(b), and 457(g) to reflect statutory changes to section 457 that have been made since the publication of those regulations 
  • Provide guidance on issues under sections 457(e)(11) and 457(e)(12) that were not addressed in the final regulations and provide additional guidance under section 457(f)

The preamble states that while the rules under section 457 apply to plan participants and beneficiaries, without regard to whether the related services are provided by an employee or independent contractor, the proposed regulations often use the terms “employee” and “employer” to describe a service provider and a service recipient—without regard to whether the service provider is an independent contractor.

© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform