IRS written determination 201434003

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201434003
Release Date: 8/22/2014
Index Number: 457.00-00
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:TEGE:EB:QP2
PLR-136744-13
Date:
February 18, 2014
TY: ------------------
Plan= ---------------------------------------------------------------------------------
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Board=--------------------------------------------------------------------------------
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County C= ---------------------------
State S= ---------------
Dear ---------------:
This responds to your authorized representative’s original letter and subsequent
correspondence, on behalf of County C, located in State S, requesting a ruling
concerning its deferred compensation plan (the “Plan”) which County C intends to be an
eligible deferred compensation plan under section 457(b) of the Internal Revenue Code
of 1986(the “Code”), as amended under the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA) and in subsequent legislation.
Under the Plan, a participant who is currently an employee of the Board of County C
may elect to defer compensation that would have been received for services rendered
to his/her employer in any taxable year until death, severance from employment,
attainment of age 70 1/2, or the occurrence of an unforeseeable emergency.
The Plan permits participants to defer compensation on a pre-tax basis. In addition, the
participant may elect to make deferrals into the Plan,upon severance of employment, of

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accumulated sick pay, accumulated vacation pay, or from back pay as permitted by
section 457 and the regulations thereunder.
The Plan provides that all elections to defer compensation and any modifications made
to such elections must be made prior to the beginning of the month in which the related
compensation would have been paid in the absence of a deferral election.
The Plan provides for a maximum amount that may be deferred by a participant in any
taxable year. It also provides for a catch-up computation for amounts deferred for one
or more of the participant’s last three taxable years ending before he or she attains
normal retirement age under the Plan. The Plan also provides for the catch-up
contributions for individuals age 50 or over under sections 414(v)and 457(e)(18).
However, the Plan provides that a participant can only utilize one of the two catch-up
contribution provisions during a single year. The amounts that may be deferred under
the annual maximum limitation and the catch-up provisions are within the limitations of
section 457(c).
Under the Plan, a participant (upon severance of employment) or beneficiarymay elect
to have any portion of benefits deferred under the plan which constitute an eligible
rollover distribution described in section 402(c)(4) of the Codepaid directly to another
eligible retirement plan described in section 402(c)(8)(B)such as an individual
retirement account (IRA) in a direct rollover, with nonspouse beneficiaries subject to
certain limitations set in section 402(c)(11).
With certain limitations, a participant or a beneficiary may elect the manner in which
their deferred amounts will be distributed. The Plan provides that the manner and time
of benefit payout must meet the distribution requirements of sections 401(a)(9) and
457(d) of the Code. The plan allows participants to take loans from their plan accounts,
subject to certainrestrictions. Loans made under the Plan are subject to rules in the
Plan, section 72(p) of the Code and section 1.457-6(f)(2) of the Income Tax Regulations
(the “regulations”), including provisions restricting the maximum amount and term of a
plan loan.
The Plan provides that all amounts of compensation deferred under the Plan are to be
held in trust (or a custodial account or annuity contract described in section 401(f)) for
the exclusive benefit of the participants and their beneficiaries. The rights of any
participant or beneficiary to payments pursuant to the Plan are generally non-assignable
and not subject to transfer, assignment, or attachment.
Section 457 of the Codeprovides rules for the deferral of compensation by an individual
participating in an eligible deferred compensation plan as defined in section 457(b).
Section 457(b) provides that an eligible deferred compensation plan must be maintained
by an eligible employer. Section 457(e)(1)(A) provides that an eligible employer

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includes a state, political subdivision of a state, or any agency or instrumentality of a
state or political subdivision of a state.
Section 457(a)(1)(A) of the Codeprovides that in the case of a participant in an eligible
governmental deferred compensation plan, any amount of compensation deferred under
the plan 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 to the participant or beneficiary. Section 457(b) provides that the term “eligible
deferred compensation plan” means a plan established and maintained by an eligible
employer in which only individuals who perform service for the employer may be
participants and which meet the deferral limitations described in section 457(c); which
meets the distribution requirements described in section 457(d); which provides for
deferral elections described in section 457(b)(4); and, in the case of a governmental
plan, which requires the plan assets and income to be held in trust for the exclusive
benefit of participants and beneficiaries as described in section 457(g).
Section 457(b)(5)prescribes that an eligible deferred compensation plan must meet the
distribution requirements of section 457(d). Under section 457(d)(1)(A), an eligible plan
must provide that amounts will not be made available to participants or beneficiaries
before i) the calendar year in which the participant attains age 70 1/2, ii) the participant
has a severance from employment with the employer, or iii) when the participant is
faced with an unforeseeable emergency as determined under the regulations.
Section 457(e)(16)provides that with respect to an eligible retirement plan established
and maintained by a governmental employer, if 1) anyportion of the balance to the
credit of an employee in the plan is paid to him/her in an eligible rollover distribution, 2)
the employee transfers any portion of the property received in such distribution to an
eligible retirement plan described in section 402(c)(8)(B), and 3) in the case of a
distribution of property other than money, the amount so transferred consists of the
property distributed, then such distribution (to the extent so transferred) shall not be
includible in gross income for the taxableyear in which paid.
Section 457(g) provides that a plan maintained by an eligible governmental employer
shall not be treated as an eligible deferred compensation plan unless all assets and
rights purchased with such deferred compensation amounts and all income attributable
to such amounts, property, or rights of the plan are held in trust for the exclusive benefit
of participants and their beneficiaries. Section 457(g)(3) provides that custodial
accounts and contracts described in section 401(f) shall betreated as trusts under rules
similar to the rules under section 401(f) which means such accounts and contracts
would be treated as organizations exempt from taxation under section 501(a).
Section 1.457-7(b)(3) provides that, in accordance with section 72(p), the amount of any
loan from an eligible governmental plan to a participant or beneficiary is generally
treated as having been received as a plan distribution under section 72(p)(1) except to

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the extent set forth in section 72(p)(2) and § 1.72(p)-1 (relating to loansthat do not
exceed a maximum amount and that are repayable in accordance with certain terms)..
Thus, except to the extent a loan from a governmental section 457(b) plan satisfies
section 72(p)(2), § 1.72(p)-1 and § 1.457-6(f)(2), any amount loaned from an eligible
governmental plan to a participant or beneficiary is includible in the gross income of the
borrower for the taxable year when the loan is made. If a loan made under the Plan
meets the requirements established under the Plan, the loan would satisfy the
requirements of section 72(p)(2), § 1.72(p)-1 and § 1.457-6(f)(2), and thus would not be
treated as a taxable distribution under section 72(p)(1) solely because the loan was
made.
Based upon the provisions of the Plan summarized above and the documents
presented, we conclude as follows:
1. The Plan constitutes an eligible deferred compensation plan as defined in section
457(b) of the Codeas amended under EGTRRA and subsequent legislation, and the
regulations thereunder.
2. Amounts of compensation deferred in accordance with the Plan, including any
income attributable to the deferred compensation, will be includible under section
457(a)(1)(A)in the recipient’s gross income for the taxable year or years in which
amounts are paid toa participant or beneficiary pursuant to the provisions of the Plan.
3. Provided that loansfrom the Plan are made in accordance with the Plan’s provisions,
the making of such loanswill not be treated as distributions subject to current taxation
under section 72(p)(1).
4. Any payment made from the Plan in the form of an eligible rollover distribution (as
defined in section 402(c)(4)), including a direct rollover, will not be includible in gross
income in the year paid to the extent the payment is transferred to an eligible retirement
plan (as defined in section 402(c)(8)(B))within 60 days, including any property
distributed from the Plan, in accordance with section 457(e)(16).
No opinion is expressed concerning the timing of the inclusion in income of amounts
deferred under any deferred compensation plan other than the Plan of County C located
in State S described above. If the Plan is significantly modified, this ruling may not
necessarily remain applicable. This ruling is directed only to County C and the
participants of the Plan and applies only to the Plan submitted on ---------------------,
including all subsequent amendments filed with this office as part of the ruling request,
and approved by the Board.

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This ruling is directed only to the Plan and not to any other section 457(b) plan. Section
6110(k)(3) of the Codeprovides that this ruling may not be used or cited as precedent.
Sincerely,
Cheryl Press
Senior Counsel, Qualified Plans Branch 2
(Employee Benefits)
(Tax Exempt & Government Entities)
Enclosure
Copy for purposes of section 6110