26 U.S.C. § 457: Deferred compensation plans of State and local governments and tax-exempt organizations

is paid to the participant or other beneficiary, in the case of a plan of an eligible employer described in subsection (e)(1)(A), and is paid or otherwise made available to the participant or other beneficiary, in the case of a plan of an eligible employer described in subsection (e)(1)(B). To the extent provided in section 72(t)(9), section 72(t) shall apply to any amount includible in gross income under this subsection. In the case of a plan of an eligible employer described in subsection (e)(1)(A), to the extent provided in section 402( l ), paragraph (1) shall not apply to amounts otherwise includible in gross income under this subsection. in which only individuals who perform service for the employer may be participants, the applicable dollar amount, or 100 percent of the participant’s includible compensation, twice the dollar amount in effect under subsection (b)(2)(A), or the plan ceiling established for purposes of paragraph (2) for the taxable year (determined without regard to this paragraph), plus so much of the plan ceiling established for purposes of paragraph (2) for taxable years before the taxable year as has not previously been used under paragraph (2) or this paragraph, in the case of an eligible employer described in subsection (e)(1)(A), will be deferred only if an agreement providing for such deferral has been entered into before the compensation is currently available to the individual, and in any other case, will be deferred for any calendar month only if an agreement providing for such deferral has been entered into before the beginning of such month, which meets the distribution requirements of subsection (d), and all amounts of compensation deferred under the plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights, The maximum amount of the compensation of any one individual which may be deferred under subsection (a) during any taxable year shall not exceed the amount in effect under subsection (b)(2)(A) (as modified by any adjustment provided under subsection (b)(3)). the calendar year in which the participant attains age 70½ (in the case of a plan maintained by an employer described in subsection (e)(1)(A), age 59½), when the participant has a severance from employment with the employer, when the participant is faced with an unforeseeable emergency (determined in the manner prescribed by the Secretary in regulations), except as may be otherwise provided by regulations, in the case of a plan maintained by an employer described in subsection (e)(1)(A), with respect to amounts invested in a lifetime income investment (as defined in section 401(a)(38)(B)(ii)), the date that is 90 days prior to the date that such lifetime income investment may no longer be held as an investment option under the plan, or as provided in section 401(a)(39), the plan meets the minimum distribution requirements of paragraph (2), in the case of a plan maintained by an employer described in subsection (e)(1)(A), the plan meets requirements similar to the requirements of section 401(a)(31), and except as may be otherwise provided by regulations, in the case of amounts described in subparagraph (A)(iv), such amounts will be distributed only in the form of a qualified distribution (as defined in section 401(a)(38)(B)(i)) or a qualified plan distribution annuity contract (as defined in section 401(a)(38)(B)(iv)). A plan meets the minimum distribution requirements of this paragraph if such plan meets the requirements of section 401(a)(9). An eligible deferred compensation plan of an employer described in subsection (e)(1)(A) shall not be treated as failing to meet the requirements of this subsection solely by reason of making a distribution described in subsection (e)(9)(A). made when the participant is faced with an unforeseeable emergency of a type which is described in regulations prescribed by the Secretary as an unforeseeable emergency, and not in excess of the amount required to satisfy the emergency need, and a State, political subdivision of a State, and any agency or instrumentality of a State or political subdivision of a State, and any other organization (other than a governmental unit) exempt from tax under this subtitle. The performance of service includes performance of service as an independent contractor and the person (or governmental unit) for whom such services are performed shall be treated as the employer. The term “participant” means an individual who is eligible to defer compensation under the plan. The term “beneficiary” means a beneficiary of the participant, his estate, or any other person whose interest in the plan is derived from the participant. The term “includible compensation” has the meaning given to the term “participant’s compensation” by section 415(c)(3). Compensation shall be taken into account at its present value. The amount of includible compensation shall be determined without regard to any community property laws. Gains from the disposition of property shall be treated as income attributable to such property. the portion of such amount which is not attributable to rollover contributions (as defined in section 411(a)(11)(D)) does not exceed the dollar limit under section 411(a)(11)(A), and no amount has been deferred under the plan with respect to such participant during the 2-year period ending on the date of the distribution, and there has been no prior distribution under the plan to such participant to which this subparagraph applied. such election is made after amounts may be available under the plan in accordance with subsection (d)(1)(A) and before commencement of such distributions, and the participant may make only 1 such election. A participant shall not be required to include in gross income any portion of the entire amount payable to such participant solely by reason of the transfer of such portion from 1 eligible deferred compensation plan to another eligible deferred compensation plan. Any bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plan. Any plan paying solely length of service awards to bona fide volunteers (or their beneficiaries) on account of qualified services performed by such volunteers. reimbursement for (or a reasonable allowance for) reasonable expenses incurred in the performance of such services, or reasonable benefits (including length of service awards), and nominal fees for such services, customarily paid by eligible employers in connection with the performance of such services by volunteers. A plan shall not be treated as described in subparagraph (A)(ii) if the aggregate amount of length of service awards accruing with respect to any year of service for any bona fide volunteer exceeds $6,000. In the case of taxable years beginning after December 31, 2017 , the Secretary shall adjust the $6,000 amount under clause (ii) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2016 , and any increase under this paragraph that is not a multiple of $500 shall be rounded to the next lowest multiple of $500. In the case of a plan described in subparagraph (A)(ii) which is a defined benefit plan (as defined in section 414(j)), the limitation under clause (ii) shall apply to the actuarial present value of the aggregate amount of length of service awards accruing with respect to any year of service. Such actuarial present value with respect to any year shall be calculated using reasonable actuarial assumptions and methods, assuming payment will be made under the most valuable form of payment under the plan with payment commencing at the later of the earliest age at which unreduced benefits are payable under the plan or the participant’s age at the time of the calculation. For purposes of this paragraph, the term “qualified services” means fire fighting and prevention services, emergency medical services, and ambulance services. makes payments or supplements as an early retirement benefit, a retirement-type subsidy, or a benefit described in the last sentence of section 411(a)(9), and such payments or supplements are made in coordination with a defined benefit plan which is described in section 401(a) and includes a trust exempt from tax under section 501(a) and which is maintained by an eligible employer described in paragraph (1)(A) or by an education association described in clause (ii)(II), a local educational agency (as defined in section 8101 of the Elementary and Secondary Education Act of 1965), or an education association which principally represents employees of 1 or more agencies described in subclause (I) and which is described in section 501(c)(5) or (6) and exempt from tax under section 501(a). This section shall not apply to nonelective deferred compensation attributable to services not performed as an employee. For purposes of subparagraph (A), deferred compensation shall be treated as nonelective only if all individuals (other than those who have not satisfied any applicable initial service requirement) with the same relationship to the payor are covered under the same plan with no individual variations or options under the plan. The term “eligible employer” shall not include a church (as defined in section 3121(w)(3)(A)) or qualified church-controlled organization (as defined in section 3121(w)(3)(B)). Subsections (b)(2) and (c)(1) shall not apply to any qualified governmental excess benefit arrangement (as defined in section 415(m)(3)), and benefits provided under such an arrangement shall not be taken into account in determining whether any other plan is an eligible deferred compensation plan. The applicable dollar amount is $15,000. In the case of taxable years beginning after December 31, 2006 , the Secretary shall adjust the $15,000 amount under subparagraph (A) at the same time and in the same manner as under section 415(d), except that the base period shall be the calendar quarter beginning July 1, 2005 , and any increase under this paragraph which is not a multiple of $500 shall be rounded to the next lowest multiple of $500. any portion of the balance to the credit of an employee in such plan is paid to such employee in an eligible rollover distribution (within the meaning of section 402(c)(4)), the employee transfers any portion of the property such employee receives in such distribution to an eligible retirement plan described in section 402(c)(8)(B), and in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, The rules of paragraphs (2) through (7), (9), and (11) of section 402(c) and section 402(f) shall apply for purposes of subparagraph (A). Rollovers under this paragraph shall be reported to the Secretary in the same manner as rollovers from qualified retirement plans (as defined in section 4974(c)). for the purchase of permissive service credit (as defined in section 415(n)(3)(A)) under such plan, or a repayment to which section 415 does not apply by reason of subsection (k)(3) thereof. the plan ceiling established for purposes of subsection (b)(2) (without regard to subsection (b)(3)), plus the lesser of any designated Roth contributions made by the participant to the plan or the applicable dollar amount for the taxable year determined under section 414(v)(2)(B)(i), or the amount determined under the applicable subsection (without regard to this paragraph). the compensation shall be included in the gross income of the participant or beneficiary for the 1st taxable year in which there is no substantial risk of forfeiture of the rights to such compensation, and the tax treatment of any amount made available under the plan to a participant or beneficiary shall be determined under section 72 (relating to annuities, etc.). a plan described in section 401(a) which includes a trust exempt from tax under section 501(a), an annuity plan or contract described in section 403, that portion of any plan which consists of a transfer of property described in section 83, that portion of any plan which consists of a trust to which section 402(b) applies, a qualified governmental excess benefit arrangement described in section 415(m), and that portion of any applicable employment retention plan described in paragraph (4) with respect to any participant. The term “plan” includes any agreement or arrangement. The rights of a person to compensation are subject to a substantial risk of forfeiture if such person’s rights to such compensation are conditioned upon the future performance of substantial services by any individual. The portion of an applicable employment retention plan described in this paragraph with respect to any participant is that portion of the plan which provides benefits payable to the participant not in excess of twice the applicable dollar limit determined under subsection (e)(15). Paragraph (2)(F) shall only apply to the portion of the plan described in subparagraph (A) for years preceding the year in which such portion is paid or otherwise made available to the participant. A plan shall not be treated for purposes of this title as providing for the deferral of compensation for any year with respect to the portion of the plan described in subparagraph (A). a local educational agency (as defined in section 8101 of the Elementary and Secondary Education Act of 1965 ( 20 U.S.C. 7801 )), or an education association which principally represents employees of 1 or more agencies described in clause (i) and which is described in section 501(c)(5) or (6) and exempt from taxation under section 501(a). retaining the services of the employee, or rewarding such employee for the employee’s service with 1 or more such agencies or associations. A plan maintained by an eligible employer described in subsection (e)(1)(A) shall not be treated as an eligible deferred compensation plan unless all assets and income of the plan described in subsection (b)(6) are held in trust for the exclusive benefit of participants and their beneficiaries. a trust described in paragraph (1) shall be treated as an organization exempt from taxation under section 501(a), and notwithstanding any other provision of this title, amounts in the trust shall be includible in the gross income of participants and beneficiaries only to the extent, and at the time, provided in this section. For purposes of this subsection, custodial accounts and contracts described in section 401(f) shall be treated as trusts under rules similar to the rules under section 401(f). A plan described in paragraph (1) shall not be treated as an eligible deferred compensation plan unless such plan meets the requirements of section 401(a)(37). The amendments made by this section [amending this section and sections 623 and 1002 of Title 29, Labor] shall take effect on the date of the enactment of this Act [ Aug. 17, 2006 ]. The amendments made by subsections (a)(1) and (b) [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [ Aug. 17, 2006 ]. The amendment made by subsection (c) [amending section 1002 of Title 29 , Labor] shall apply to plan years ending after the date of the enactment of this Act [ Aug. 17, 2006 ]. Nothing in the amendments made by this section [amending this section and sections 623 and 1002 of Title 29, Labor] shall alter or affect the construction of the Internal Revenue Code of 1986, the Employee Retirement Income Security Act of 1974 [ 29 U.S.C. 1001 et seq.], or the Age Discrimination in Employment Act of 1967 [ 29 U.S.C. 621 et seq.] as applied to any plan, arrangement, or conduct to which such amendments do not apply.” Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to assets and income described in section 457(b)(6) of the Internal Revenue Code of 1986 held by a plan on and after the date of the enactment of this Act [ Aug. 20, 1996 ]. In the case of a plan in existence on the date of the enactment of this Act, a trust need not be established by reason of the amendments made by this section before January 1, 1999 .” The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1987 . Section 457 of the 1986 Code (as in effect before and after the amendments made by section 1107 of the Reform Act [ Pub. L. 99–514 ]) shall not apply to nonelective deferred compensation provided under a plan in existence on December 31, 1987 , and maintained pursuant to a collective bargaining agreement. For purposes of this paragraph, a nonelective plan is a plan which covers a broad group of employees and under which the covered employees earn nonelective deferred compensation under a definite, fixed and uniform benefit formula. This paragraph shall cease to apply to a plan as of the effective date of the first material modification of the plan agreed to after December 31, 1987 . if such amounts were deferred from periods before July 14, 1988 , or was in writing on such date, and on such date provides for a deferral for each taxable year covered by the agreement of a fixed amount or of an amount determined pursuant to a fixed formula, and the individual with respect to whom the deferral is made was covered under such agreement on such date. The Secretary of the Treasury or his delegate shall conduct a study on the tax treatment of deferred compensation paid by State and local governments and tax-exempt organizations (including deferred compensation paid to independent contractors). Not later than January 1, 1990 , the Secretary shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on the study conducted under this paragraph together with such recommendations as he may deem advisable.” Except as provided in this subsection, the amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1988 . Paragraphs (9) and (10) of section 457(e) of the Internal Revenue Code of 1986 (as amended by this section) shall apply to taxable years beginning after December 31, 1986 . Except as provided in subparagraph (B), the application of section 457 of the Internal Revenue Code of 1986 by reason of the amendments made by this section to deferred compensation plans established and maintained by organizations exempt from tax shall apply to taxable years beginning after December 31, 1986 . were deferred from taxable years beginning before January 1, 1987 , or was in writing on August 16, 1986 , on such date provides for a deferral for each taxable year covered by the agreement of a fixed amount or of an amount determined pursuant to a fixed formula. The amendments made by this section shall not apply to any qualified State judicial plan (as defined in section 131(c)(3)(B) of the Revenue Act of 1978 [set out as a note below] as amended by section 252 of the Tax Equity and Fiscal Responsibility Act of 1982). to employees on August 16, 1986 , of a nonprofit corporation organized under the laws of the State of Alabama maintaining a deferred compensation plan with respect to which the Internal Revenue Service issued a ruling dated March 17, 1976 , that the plan would not affect the tax-exempt status of the corporation, or to to [sic] individuals eligible to participate on August 16, 1986 , in a deferred compensation plan with respect to which a letter dated November 6, 1975 , submitted the original plan to the Internal Revenue Service, an amendment was submitted on November 19, 1975 , and the Internal Revenue Service responded with a letter dated December 24, 1975 , any amount of compensation deferred under a plan of a State providing for a deferral of compensation (other than a plan described in section 457(e)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]), and any income attributable to the amounts so deferred, shall be includible in gross income only for the taxable year in which such compensation or other income is paid or otherwise made available to the participant or other beneficiary, but $7,500, or 33⅓ percent of the participant’s includible compensation. If, in the case of any participant for any taxable year, all of the plans are eligible State deferred compensation plans, then clause (ii) of subparagraph (A) of this paragraph shall be applied with the modification provided by paragraph (3) of section 457(b) of such Code. In applying clause (ii) of subparagraph (A) of this paragraph and section 403(b)(2)(A)(ii) of such Code, rules similar to the rules of section 457(c)(2) of such Code shall apply. Except as otherwise provided in this paragraph, terms used in this paragraph shall have the same meaning as when used in section 457 of such Code.” The amendments made by this section [enacting this section and provisions set out as notes under this section] shall not apply to any qualified State judicial plan. such plan has been continuously in existence since December 31, 1978 , are required to participate, and are required to contribute the same fixed percentage of their basic or regular rate of compensation as judge, under such plan, no judge has an option as to contributions or benefits the exercise of which would affect the amount of includible compensation, the retirement payments of a judge under the plan are a percentage of the compensation of judges of that State holding similar positions, and the plan during any year does not pay benefits with respect to any participant which exceed the limitations of section 415(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954].”