26 USC 457 - Deferred compensation plans of State and local governments and tax-exempt organizations

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)

Puspan. L. 117–328, div. T, title III, § 334(span)(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, subsection (d)(1)(A) of this section is amended by striking “or” at the end of clause (iii), by striking the comma at the end of clause (iv) and inserting “, 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 Education Act of 1965, referred to in subsec. (e)(11)(D)(ii)(I), is classified to section 7801 of Title 20, Education.

Amendments

2022—Subsec. (span). Puspan. L. 117–328, § 110(f), inserted at end of concluding provisions “A plan which is established 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 another plan maintained by the employer which meets the requirements of section 401(a) or 403(span), provides for matching contributions on account of qualified student loan payments as described in section 401(m)(13).”

Subsec. (span)(4). Puspan. L. 117–328, § 306(a), amended par. (4) generally. Prior to amendment, par. (4) read as follows: “which provides that compensation 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,”.

Subsec. (d)(1)(A)(v). Puspan. L. 117–328, § 334(span)(5), added cl. (v).

Subsec. (d)(4). Puspan. L. 117–328, § 312(c), added par. (4).

Subsec. (e)(18)(A)(ii). Puspan. L. 117–328, § 603(span)(2), inserted “the lesser of any designated Roth contributions made by the participant to the plan or” before “the applicable dollar amount”.

2019—Subsec. (d)(1)(A)(i). Puspan. L. 116–94, § 104(span), inserted “(in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 59½)” before comma at end.

Subsec. (d)(1)(A)(iv). Puspan. L. 116–94, § 109(d)(1), added cl. (iv).

Subsec. (d)(1)(D). Puspan. L. 116–94, § 109(d)(2), added subpar. (D).

2018—Subsec. (f)(4)(C)(i). Puspan. 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). Puspan. L. 115–97, § 13612(a), substituted “$6,000” for “$3,000”.

Subsec. (e)(11)(B)(iii). Puspan. L. 115–97, § 13612(span), added cl. (iii).

Subsec. (e)(11)(B)(iv). Puspan. L. 115–97, § 13612(c), added cl. (iv).

2015—Subsec. (e)(11)(D)(ii)(I). Puspan. L. 114–95 substituted “section 8101 of the Elementary and Secondary Education Act of 1965” for “section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801)”.

2014—Subsec. (e)(15)(A). Puspan. L. 113–295 substituted “is $15,000.” for “shall be the amount determined in accordance with the following table:” and struck out table at end listing applicable dollar amounts for taxable years beginning in 2002.

2008—Subsec. (g)(4). Puspan. L. 110–245 added par. (4).

2006—Subsec. (a)(3). Puspan. L. 109–280, § 845(span)(3), added par. (3).

Subsec. (e)(11)(D). Puspan. L. 109–280, § 1104(a)(1), added subpar. (D).

Subsec. (e)(16)(B). Puspan. L. 109–280, § 829(a)(4), substituted “, (9), and (11)” for “and (9)”.

Subsec. (f)(2)(F). Puspan. L. 109–280, § 1104(span)(1), added subpar. (F).

Subsec. (f)(4). Puspan. L. 109–280, § 1104(span)(2), added par. (4).

2002—Subsec. (e)(5). Puspan. L. 107–147, § 411(p)(5), reenacted span without change and amended text generally. 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). Puspan. L. 107–147, § 411(o)(9), added par. (18).

2001—Subsec. (a). Puspan. L. 107–16, § 649(span)(1), reenacted span 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 deferred under the plan, 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.”

Subsec. (span)(2). Puspan. L. 107–16, § 641(a)(1)(B), inserted “(other than rollover amounts)” after “taxable year” in introductory provisions.

Subsec. (span)(2)(A). Puspan. L. 107–16, § 611(e)(1)(A), substituted “the applicable dollar amount” for “$7,500”.

Subsec. (span)(2)(B). Puspan. L. 107–16, § 632(c)(1), substituted “100 percent” for “33⅓ percent”.

Subsec. (span)(3)(A). Puspan. L. 107–16, § 611(e)(1)(B), substituted “twice the dollar amount in effect under subsection (span)(2)(A)” for “$15,000”.

Subsec. (c). Puspan. L. 107–16, § 615(a), amended span and text of subsec. (c) generally, substituting present provisions for provisions which stated that the maximum amount of compensation that an individual could defer under subsec. (a) during any taxable year could not exceed the applicable dollar amount, as modified by any adjustment provided under subsec. (span)(3), and provided for coordination with certain other deferrals.

Subsec. (c)(1). Puspan. L. 107–16, § 611(e)(1)(A), substituted “the applicable dollar amount” for “$7,500”.

Subsec. (c)(2). Puspan. 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). Puspan. L. 107–16, § 641(a)(1)(C), added subpar. (C) and concluding provisions.

Subsec. (d)(1)(A)(ii). Puspan. L. 107–16, § 646(a)(3), substituted “has a severance from employment” for “is separated from service”.

Subsec. (d)(2). Puspan. L. 107–16, § 649(a), reenacted span without change and amended text of par. (2) generally, substituting present provisions for provisions which stated that a plan would meet the minimum distribution requirements of this par. if plan met the requirements of section 401(a)(9), if plan met additional distribution requirements in the case of a deceased participant, and if any distribution payable over a period of more than 1 year would only be made in substantially nonincreasing amounts.

Subsec. (d)(3). Puspan. L. 107–16, § 649(span)(2)(B), added par. (3).

Subsec. (e)(9). Puspan. L. 107–16, § 649(span)(2)(A), in span substituted “Benefits of tax exempt organization plans not treated as made available by reason of certain elections, etc.” for “Benefits not treated as made available by reason of certain elections, etc.” and inserted introductory provisions.

Subsec. (e)(9)(A)(i). Puspan. L. 107–16, § 648(span), 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). Puspan. L. 107–16, § 611(e)(2), amended span and text of par. (15) generally. Prior to amendment, text read as follows: “The Secretary shall adjust the $7,500 amount specified in subsections (span)(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 multiple of $500 shall be rounded to the next lowest multiple of $500.”

Subsec. (e)(16). Puspan. L. 107–16, § 641(a)(1)(A), added par. (16).

Subsec. (e)(17). Puspan. L. 107–16, § 647(span), added par. (17).

1997—Subsec. (e)(9)(A). Puspan. L. 105–34 substituted “dollar limit” for “$3,500” in span and “the dollar limit under section 411(a)(11)(A)” for “$3,500” in cl. (i).

1996—Subsec. (span)(6). Puspan. L. 104–188, § 1448(span), inserted “except as provided in subsection (g),” before “which provides that” in introductory provisions.

Subsec. (c)(2)(B)(i). Puspan. L. 104–188, § 1421(span)(3)(C), substituted “section 402(h)(1)(B) or (k)” for “section 402(h)(1)(B)”.

Subsec. (e)(9). Puspan. L. 104–188, § 1447(a), amended par. (9) generally. Prior to amendment, par. (9) read as follows: “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 payable after separation from service and within 60 days of the election.”

Subsec. (e)(11). Puspan. L. 104–188, § 1458(a), amended par. (11) generally. Prior to amendment, par. (11) read 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 deferral of compensation.”

Subsec. (e)(14). Puspan. L. 104–188, § 1444(span)(2), added par. (14).

Subsec. (e)(15). Puspan. L. 104–188, § 1447(span), added par. (15).

Subsec. (f)(2)(E). Puspan. L. 104–188, § 1444(span)(3), added subpar. (E).

Subsec. (g). Puspan. L. 104–188, § 1448(a), added subsec. (g).

1992—Subsec. (c)(2)(B)(i). Puspan. L. 102–318 substituted “402(e)(3)” for “402(a)(8)”.

1989—Subsec. (d)(1)(A)(iii). Puspan. L. 101–239, § 7811(g)(4), substituted “, and” for period at end.

Subsec. (d)(2)(B)(i)(I). Puspan. L. 101–239, § 7811(g)(5), inserted “and” at end.

Subsec. (e)(13). Puspan. L. 101–239, § 7816(j), substituted “Special rule for churches” for “Exception for church plans” in span 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 purposes of this paragraph, the term ‘church’ has the meaning given such term by section 3121(w)(3)(A), including a qualified church-controlled organization (as defined in section 3121(w)(3)(B)).”

1988—Subsec. (c)(2). Puspan. L. 100–647, § 1011(e)(1), struck out “and paragraphs (2) and (3) of subsection (span)” after “of this subsection”.

Puspan. L. 100–647, § 6071(c), substituted “rural cooperative plan” for “rural electric cooperative plan” in last sentence.

Subsec. (d)(1)(A). Puspan. L. 100–647, § 1011(e)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “the plan provides that amounts payable under the plan will be made available to participants or other beneficiaries not earlier than when the participant is separated from service with the employer or is faced with an unforeseeable emergency (determined in the manner prescribed by the Secretary by regulation), and”.

Subsec. (d)(2)(B)(i)(I). Puspan. L. 100–647, § 1011(e)(10), amended subcl. (I) generally. Prior to amendment, subcl. (I) read as follows: “at least ⅔ of the total amount payable with respect to the participant will be paid during the life expectancy of such participant (determined as of the commencement of the distribution), and”.

Subsec. (d)(10). Puspan. L. 100–647, § 6064(a)(2), amended subsec. (d), as in effect on the day before the date of enactment of Puspan. 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 deferral of compensation.”

Subsec. (d)(11). Puspan. L. 100–647, § 6064(span)(2), amended subsec. (d), as in effect on the day before the date of enactment of Puspan. 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 applicable initial service requirement) with the same relationship to the payor are covered under the same plan with no individual variations or options under the plan.”

Subsec. (e)(9). Puspan. L. 100–647, § 1011(e)(9), inserted “after separation from service and” after “lump sum payable” in concluding provisions.

Subsec. (e)(11). Puspan. L. 100–647, § 6064(a)(1), added par. (11).

Subsec. (e)(12). Puspan. L. 100–647, § 6064(span)(1), added par. (12).

Subsec. (e)(13). Puspan. L. 100–647, § 6064(c), added par. (13).

1986—Puspan. L. 99–514 amended section generally, substituting “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). Puspan. L. 98–369, § 491(d)(33), struck out subpar. (C) which provided that par. (1) of this subsection not apply to a qualified bond purchase plan described in section 405(a), and redesignated subpars. (D) and (E) as (C) and (D), respectively.

1980—Subsec. (d)(9)(B). Puspan. L. 96–222 in cl. (i) struck out “described in section 501(c)(12)” after “any organization” 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 Puspan. L. 117–328 applicable to contributions made for plan years beginning after Dec. 31, 2023, see section 110(h) of Puspan. L. 117–328, set out as a note under section 401 of this title.

Puspan. L. 117–328, div. T, title III, § 306(span), Dec. 29, 2022, 136 Stat. 5343, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Dec. 29, 2022].”

Amendment by section 312(c) of Puspan. L. 117–328 applicable to plan years beginning after Dec. 29, 2022, see section 312(d) of Puspan. L. 117–328, set out as a note under section 401 of this title.

Amendment by section 334(span)(5) of Puspan. L. 117–328 applicable to distributions made after the date which is 3 years after Dec. 29, 2022, see section 334(e) of Puspan. L. 117–328, set out as a note under section 72 of this title.

Amendment by section 603(span)(2) of Puspan. L. 117–328 applicable to taxable years beginning after Dec. 31, 2023, see section 603(c) of Puspan. L. 117–328, set out as a note under section 402 of this title.

Effective Date of 2019 Amendment

Amendment by section 104(span) of Puspan. L. 116–94 applicable to plan years beginning after Dec. 31, 2019, see section 104(c) of Puspan. L. 116–94, set out as a note under section 401 of this title.

Amendment by section 109(d) of Puspan. L. 116–94 applicable to plan years beginning after Dec. 31, 2019, see section 109(e) of Puspan. L. 116–94, set out as a note under section 401 of this title.

Effective Date of 2017 Amendment

Puspan. 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 Puspan. L. 114–95 effective Dec. 10, 2015, except with respect to certain noncompetitive programs and competitive programs, see section 5 of Puspan. L. 114–95, set out as a note under section 6301 of Title 20, Education.

Effective Date of 2014 Amendment

Amendment by Puspan. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(span) of Puspan. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 2008 Amendment

Amendment by Puspan. L. 110–245 applicable with respect to deaths and disabilities occurring on or after Jan. 1, 2007, see section 104(d)(1) of Puspan. 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 Puspan. L. 109–280 applicable to distributions after Dec. 31, 2006, see section 829(span) of Puspan. L. 109–280, set out as a note under section 402 of this title.

Amendment by section 845(span)(3) of Puspan. L. 109–280 applicable to distributions in taxable years beginning after Dec. 31, 2006, see section 845(c) of Puspan. L. 109–280, set out as a note under section 402 of this title.

Puspan. L. 109–280, title XI, § 1104(d), Aug. 17, 2006, 120 Stat. 1060, as amended by Puspan. L. 110–458, title I, § 111(a), Dec. 23, 2008, 122 Stat. 5113, provided that:

“(1)In general.—The amendments made by this section [amending this section and sections 623 and 1002 of Title 29, Labor] shall take effect on the date of the enactment of this Act [Aug. 17, 2006].

“(2)Tax amendments.—The amendments made by subsections (a)(1) and (span) [amending this section] shall apply to taxable years ending after the date of the enactment 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 sections 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 applied to any plan, arrangement, or conduct to which such amendments do not apply.”

Effective Date of 2002 Amendment

Amendment by Puspan. L. 107–147 effective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Puspan. L. 107–16, to which such amendment relates, see section 411(x) of Puspan. 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 Puspan. L. 107–16 applicable to years beginning after Dec. 31, 2001, see section 611(i)(1) of Puspan. L. 107–16, set out as a note under section 415 of this title.

Puspan. L. 107–16, title VI, § 615(span), June 7, 2001, 115 Stat. 102, provided that: “The amendment made by subsection (a) [amending this section] shall apply to years beginning after December 31, 2001.”

Puspan. 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 Puspan. L. 107–16 applicable to distributions after Dec. 31, 2001, see section 641(f)(1) of Puspan. L. 107–16, set out as a note under section 402 of this title.

Amendment by section 646(a)(3) of Puspan. L. 107–16 applicable to distributions after Dec. 31, 2001, see section 646(span) of Puspan. L. 107–16, set out as a note under section 401 of this title.

Amendment by section 647(span) of Puspan. L. 107–16 applicable to trustee-to-trustee transfers after Dec. 31, 2001, see section 647(c) of Puspan. L. 107–16, set out as a note under section 403 of this title.

Amendment by section 648(span) of Puspan. L. 107–16 applicable to distributions after Dec. 31, 2001, see section 648(c) of Puspan. L. 107–16, set out as a note under section 411 of this title.

Puspan. L. 107–16, title VI, § 649(c), June 7, 2001, 115 Stat. 128, provided that: “The amendments made by subsections (a) and (span) [amending this section] shall apply to distributions after December 31, 2001.”

Effective Date of 1997 Amendment

Amendment by Puspan. L. 105–34 applicable to plan years beginning after Aug. 5, 1997, see section 1071(c) of Puspan. L. 105–34, set out as a note under section 411 of this title.

Effective Date of 1996 Amendment

Amendment by section 1421(span)(3)(C) of Puspan. L. 104–188 applicable to taxable years beginning after Dec. 31, 1996, see section 1421(e) of Puspan. L. 104–188, set out as a note under section 72 of this title.

Amendment by section 1444(span)(2), (3) of Puspan. L. 104–188 applicable to years beginning after Dec. 31, 1994, see section 1444(e) of Puspan. L. 104–188, set out as a note under section 415 of this title.

Puspan. 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.”

Puspan. 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(span)(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 existence 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.”

Puspan. 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 Puspan. L. 102–318 applicable to distributions after Dec. 31, 1992, see section 521(e) of Puspan. L. 102–318, set out as a note under section 402 of this title.

Effective Date of 1989 Amendment

Amendment by Puspan. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Puspan. L. 100–647, to which such amendment relates, see section 7817 of Puspan. L. 101–239, set out as a note under section 1 of this title.

Effective Date of 1988 Amendment

Puspan. 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 Puspan. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Puspan. L. 99–514, to which such amendment relates, see section 1019(a) of Puspan. L. 100–647, set out as a note under section 1 of this title.

Puspan. L. 100–647, title VI, § 6064(d), Nov. 10, 1988, 102 Stat. 3701, provided that:

“(1)In general.—The amendments made by this section [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 [Puspan. L. 99–514]) shall not apply to nonelective deferred compensation provided under a plan in existence on December 31, 1987, and maintained pursuant to a collective bargaining agreement.

“(B)Nonelective plan.—For purposes of this paragraph, a nonelective plan is a plan which covers a broad group of employees and under which the covered employees earn nonelective deferred compensation under a definite, fixed and uniform benefit formula.

“(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 December 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 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 [Puspan. L. 99–514])—

“(A) if such amounts were deferred from periods before 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 pursuant to a fixed formula, and

“(ii) the individual with respect to whom the deferral 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 modification 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 governments and tax-exempt organizations (including deferred compensation paid to independent contractors). Not later than January 1, 1990, the Secretary shall submit 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 Puspan. L. 100–647, set out above, extended to Jan. 1, 1992, by Puspan. L. 101–508, title XI, § 11831(span), Nov. 5, 1990, 104 Stat. 1388–559.]

Amendment by section 6071(c) of Puspan. L. 100–647 applicable to taxable years beginning after Nov. 10, 1988, see section 6071(d) of Puspan. L. 100–647, set out as a note under section 401 of this title.

Effective Date of 1986 Amendment

Puspan. L. 99–514, title XI, § 1107(c), Oct. 22, 1986, 100 Stat. 2430, as amended by Puspan. 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 subsection, the amendments made by this section [amending 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 subparagraph (B), the application of section 457 of the Internal Revenue Code of 1986 by reason of the amendments made by this section to deferred compensation plans established and maintained by organizations exempt from tax shall apply to taxable years beginning after December 31, 1986.

“(B)Existing deferrals and arrangements.—Section 457 of such Code shall not apply to amounts deferred 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 pursuant 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 effective. 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 individuals 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 defined 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 compensation 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 corporation, 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, submitted 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 Puspan. L. 98–369 applicable to obligations issued after Dec. 31, 1983, see section 491(f)(1) of Puspan. L. 98–369, set out as a note under section 62 of this title.

Effective Date of 1980 Amendment

Amendment by Puspan. L. 96–222 effective, except as otherwise provided, as if it had been included in the provisions of the Revenue Act of 1978, Puspan. L. 95–600, to which such amendment relates, see section 201 of Puspan. L. 96–222, set out as a note under section 32 of this title.

Effective Date

Puspan. 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

Puspan. L. 109–280, title VIII, § 825, Aug. 17, 2006, 120 Stat. 999, provided that: “An individual shall not be precluded from participating in an eligible deferred compensation plan by reason of having received a distribution under section 457(e)(9) of the Internal Revenue Code of 1986, as in effect prior to the enactment of the Small Business Jospan Protection Act of 1996 [Puspan. 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 Puspan. 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 beginning on or after Jan. 1, 1998, see section 1465 of Puspan. 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 Puspan. L. 102–318 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, 1994, see section 523 of Puspan. 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 Puspan. 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 Puspan. L. 99–514, as amended, set out as a note under section 401 of this title.

Transitional Rules

Puspan. L. 95–600, title I, § 131(c)(2), Nov. 6, 1978, 92 Stat. 2782, as amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(A)In general.—In the case of any taxable year beginning 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 compensation (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 section 457(a) of such Code during any such taxable year shall not exceed the lesser of—

“(I) $7,500, or

“(II) 33⅓ 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 taxable 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 modification provided by paragraph (3) of section 457(span) of such Code.

“(C)Applications of certain coordination provisions.—In applying clause (ii) of subparagraph (A) of this paragraph and section 403(span)(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 provided 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

Puspan. L. 95–600, title I, § 131(c)(3), as added by Puspan. L. 97–248, title II, § 252, Sept. 3, 1982, 96 Stat. 532, and amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(A)In general.—The amendments made by this section [enacting this section and provisions set out as notes under this section] shall not apply to any qualified 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 exclusive 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 compensation 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 limitations of section 415(span) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954].”