rolling risk of forfeiture Archives - EMPLOYEE BENEFITS BLOG

An Overview of the New Section 457(f) Regulations

On June 22, 2016, the Internal Revenue Service (IRS) issued proposed regulations under Section 457(f) of the Internal Revenue Code of 1986, as amended (Code). These long-awaited regulations were first previewed in IRS Notice 2007-62. In that Notice, the IRS announced its intention to issue proposed regulations that would harmonize the rules for deferred compensation plans of tax-exempt organizations (and state and local governments) under Section 457(f) with the then-new special rules for all deferred compensation arrangements under Section 409A. After nine years, the proposed regulations now issued address three principal issues, although with some unexpected changes and opportunities.

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Section 457(f) Proposed Regulations – Not What We Expected (In a Good Way)

The very long awaited release of the new proposed regulations for Internal Revenue Code (the ‘‘Code’’) Section 457(f) plans arrived at the end of June and presents welcome and surprising new opportunities with respect to tax-exempt and governmental entities’ ‘‘ineligible nonqualified deferred compensation’’ arrangements.

The Proposed Regulations present some unexpected and surprising opportunities with respect to the ability to electively defer compensation and to have deferred compensation paid out, contingent on a valid covenant not to compete and upon a rolling risk of forfeiture.

Read the full article here to learn more.