Two Qs re: 457(f)/409A

[Christine Roberts]

Two questions re: 457(f) and 409A "overlapping" compliance:

1) if a 457(f) plan requires immediate distribution upon vesting (assume cliff vesting), or in any event no later than the 2 1/2 month period following the year in which vesting occurs, can the plan still call itself "exempt" from 409A compliance (due to the short-term deferral exception) if the 457(f) plan provides for installment distributions in the event of a participant's disability?

2) if the answer to question (1) is "yes," could the same Section 457(f) plan make a Participant's demotion to a job outside the top-hat group grounds grounds for immediate vesting/distribution? Clearly this is not a recognized distribution event under 409A but possibly would be a sufficient vesting event under Section 83?

I personally don't think that the short-term deferral exception is so broad as to completely exempt a Section 457(f) plan from 409A compliance. However I would be interested in hearing other opinions.