457(e)(12) Plan for Independent Contractors

[LCARUSI]

What are the rules relating to withholding from distributions in such a Plan?

1)Is withholding mandatory?

2)Is it optional?

3)What is withheld? (e.g., it's generally 20% from a qualified plan)

[Guest bswift]

my understanding is that if the payment is made to a nonemployee there is no withholding obligation. Generally, however, distributions from a deferred compensation plan (even a 457 plan) are treated as wages for employees and withholding is required. Deferred compensation payments made to a nonemployee should not be subject to withholding.

[LCARUSI]

BSWIFT -

I don't have a lot of experience in this area - I'm a qualified plan kind of guy . But I did review regulations under IRC secs 3401 - 3405. I conclude the distribution is subject to withholding under 3405 and the actual amount of withholding depends on whether the distribution is periodic or nonperiodic.

Your thoughts on that?