457(f) Prop Regs - Non-Compete Questions

Recommended Posts

1. I don't see this addressed anywhere in the proposed 457 regulations (or existing regulations or 83 regulations for that matter). There's a somewhat bright-line rule requiring two years of services to create a substantial risk of forfeiture under 457(f). However, there's no mention of how long a non-compete must last. I would imagine the IRS would disregard a very short non-compete, e.g., you retire on December 31, 2017, and have a non-compete that lasts until April 1, 2018, at which point you are paid. Is anyone aware of any guidance in the form of PLRs, conferences, private conversations, etc.? 

2. Under the proposed regulations, I don't see anything that would prohibit entering a non-compete for the first time upon termination and relying solely on the non-compete to create a substantial risk of forfeiture. For example (assuming you meet the new non-compete conditions for legitimate interests, enforceable agreement, efforts to enforce) an employee voluntarily terminates with no deferred comp plan in place. In connection with the termination, the employer offers a five-year non-compete with payments of $100,000 for each year that the employee complies with the non-compete. I don't see anything that requires substantial services before the non-compete to create a substantial risk of forfeiture for the payments during the non-compete period.

Thanks in advance!

Share this post

Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now