Section 457 will likely not contain tighter restrictions than those proposed in May , said Cheryl Press, senior counsel in the Office of Chief Counsel, Tax Exempt and Government Entities speaking at the annual West Conference on Tax Exempt Organizations.
Press said the proposed rules, under certain circumstances, would allow for plan loans and the deferral of sick and vacation pay. Additionally, the new rules may put an end to the use of non-qualified stock options by non-profit organizations.
Until finalized, plan sponsors, nonprofit groups and tax preparers should rely on the proposed regulations, REG-105885-99, despite the fact that they are not final. The IRS is still reviewing and considering changes, Press said.
Audit guidelines for Section 457 are also in the works, and are expected shortly after the expected mid-2003 release of the final Section 457 regulations, said Press.
Additionally, the IRS is preparing comprehensive guidance for tax-sheltered annuities under Section 403(b). Press said this guidance is likely by the end of June 2003.