What is the reach of 457(f)?

[Ken Davis]

All,

What exactly is the reach of 457(f)? Does it reach normal payroll payment practices? The 457(f) regs speak of a plan as being any arrangement under which "the payment of compensation is deferred . . . ." Deferred from what point in time? Deferred from when it would otherwise be paid or be made available? For example, what if an employee is paid monthly on the first of the month following the month in which the services are performed (December earnings are paid on January 1)? The first of the next month is the normal payroll payment date. Is that payment "deferred" under the 457(f) regs?

Thanks,

Ken Davis

Univ. of South Alabama

[TLGeer]

Two comments. First, any 457(f) is also a 409A situation. Because the two provisions are parallel but not identical, any 457(f) question requires three answers--457(f), 409A and combined.

Second, the structure of the 457(f)/409A rules is such that any deferral of any kind is regulated. The question is always whether there is an applicable exception or rule allowing the practice.

Fortunately, on your narrow facts, and assuming we can assume that all else is normal, there is no problem. However, for example, if that last payroll were part of an annualization arrangement for part-year employees there most definitely would be a problem.

There is no hard answer to any general question, and the term "normal" has no relationship to how and when the rules bite.

Tom Geer

[Guest Tauriffic]

Two comments. First, any 457(f) is also a 409A situation. Because the two provisions are parallel but not identical, any 457(f) question requires three answers--457(f), 409A and combined.

Second, the structure of the 457(f)/409A rules is such that any deferral of any kind is regulated. The question is always whether there is an applicable exception or rule allowing the practice.

Fortunately, on your narrow facts, and assuming we can assume that all else is normal, there is no problem. However, for example, if that last payroll were part of an annualization arrangement for part-year employees there most definitely would be a problem.

There is no hard answer to any general question, and the term "normal" has no relationship to how and when the rules bite.

Tom Geer

OP, your answer is in Treas. Reg. 1.409A-1(b)(3). This is a 409A problem because 457(f) plans are by definition "nonqualified." Ergo, we look to nonqualified DC regs (i.e., 409A regs)

[J Simmons]

Tauriffic,

By your answer, are you saying that 409A has completely displaced 457f, and that if a situation is okay under 409A there is no need to comply also with 457f?