Guest post written by Jim Patterson, Attorney for Burns-Fazzi, Brock
After years of waiting, we are hearing rumblings that the proposed 457(f) regulations may be issued in 2012. The IRS “anticipates” changing the current 457(f) rules to recognize only cliff vesting and disallow elective deferrals. Plans using noncompete restrictions as the sole risks of forfeiture will no longer defer taxes. Fortunately, 457(b) plans would not be affected.
As nonqualified deferral plans for credit unions normally use cliff vesting to qualify for tax deferral under 457(f), and supplemental employer contributions rather than elective deferrals, the new rules should require few if any changes to credit union plans. (Nice for a change!)