IRS Issues §457 Guidance on Teacher Part-Year
Comp
July 2, 2008 (PLANSPONSOR.com) - The Internal
Revenue Service has issued a notice of the proposed treatment
of recurring part-year compensation under §457(f) and §409A
of the Internal Revenue Code.
In Notice 2008-62, the IRS said the regulations to
be proposed are expected to address certain types of
arrangements involving recurring part-year compensation,
including common arrangements involving public school
employees who provide services during a 10-month school
year and elect to be paid ratably over 12 months. The IRS
said taxpayers may rely on the guidance effective July
1.
The regulations to be proposed under §457(f) will
specify that an arrangement in which an employee or
independent contractor receives recurring part-year
compensation as defined in §409A does not provide for
deferred compensation for purposes of § 457(f) if:
-
the arrangement does not defer payment of any
of the recurring part-year compensation beyond the
last day of the 13
th
month following the beginning of the service period,
and
-
does not defer from one taxable year to the
next taxable year the payment of more than the
applicable dollar amount under §402(g)(1)(B) in
effect for the calendar year in which the service
period begins ($15,500 for 2008).
The agency said it anticipates these rules should
exclude from coverage under §457(f) and §409A most
arrangements for public school teachers and other
school-year employees under which they are permitted to
annualize school-year compensation (whether or not they
are given individual elections). The notice gives
examples for school district employees under certain
payment scenarios.
The IRS previously addressed the impact of §409A
rules on teacher compensation in August 2007 (See
IRS Clarifies 409A NQDC Rules'
Impact on Teacher Comp
).
The notice, scheduled to be published in Internal
Revenue Bulletin 2008-29 dated July 21, 2008, is
here
.
Rebecca Moore
editors@plansponsor.com