457(f) vesting

[Guest shaul]

If a participant in a 457(f) plan is promised $50,000 provided he is continuously employed from January 1, 2010 through December 31, 2012, is the $50,000 includible in his 2012 income, or in his 2013 income? The statute and regulations refer to income inclusion in the "first taxable year in which there is no substantial risk of forfeiture." Given that the forfeiture lapses on December 31, 2012, presumably it is includible in his 2012 income. I'm just concerned that the statute could be read to mean 2013 was the first year in which there was absolutely "no" risk of forfeiture.

Thanks.

[jpod]

We say "January 1, 2013" if we want it to be taxed in 2013. The way I read the language you presented, if he is employed at 12:01 am on Dec. 31, he's vested, and there ceases to be a SRF, so it's includable in 2012. Probably the best result for all concerned, given that you don't have to start over with a brand new Social Security wage base.

[Guest shaul]

We say "January 1, 2013" if we want it to be taxed in 2013. The way I read the language you presented, if he is employed at 12:01 am on Dec. 31, he's vested, and there ceases to be a SRF, so it's includable in 2012. Probably the best result for all concerned, given that you don't have to start over with a brand new Social Security wage base.

Thanks - that's helpful, and what I thought would be the right answer.