More than seven years after working to settle questions about 457 plans at federal credit unions, the Internal Revenue Service recently announced that it plans to issue proposed regulations to clarify how they are used.
Under Section 457 of the Internal Revenue Code, FCUs would be eligible to establish executive deferred compensation plans.
The issue was first raised in 2004 when the IRS issued a private letter ruling, which stated that a FCU was not an eligible employer under Section 457 because it was a federal government instrumentality. Regulations under the section define an eligible employer as an entity that is a state or tax-exempt organization that establishes a plan. Not included is the federal government or any agency or instrumentality thereof.
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