IRS Provides Model 457 Plan Amendments

August 10, 2004 ( - The Internal Revenue Service (IRS) has released model 457 plan amendment documents.

Revenue Procedure 2004-56provides model amendments that may be used by a State or local government eligible employer to amend or draft a § 457(b) plan.   However, the revenue procedure does not apply to eligible § 457(b) plans of tax-exempt entities or ineligible plans under § 457(f).

>Plans of deferred compensation described in the Internal Revenue Code (IRC) § 457 are available for certain state and local governments and non-governmental entities. They can be either eligible plans under § 457(b) or ineligible plans under § 457(f). Plans eligible under 457(b) allow employees of sponsoring organizations to defer income taxation on retirement savings into future years. Ineligible plans may trigger different tax treatment under 457(f).

The Model Amendments have been prepared to conform with the applicable § 457(b) requirements, taking into account the general requirement that an eligible plan must include all of the material terms and conditions for benefits under the plan, the IRS said.   For example, the Model Amendments do not incorporate the applicable legal requirements by reference, but instead describe those requirements in a manner intended to enable the plan administrator to implement the plan provisions on the basis of the language of the Model Amendments to the extent feasible.

Additionally, the Model Amendments contain optional as well as required provisions that may be used in adopting an eligible plan.   For example, eligible § 457(b) plans have the option of containing features such as:

  • service distributions from rollover accounts;
  • distributions for unforeseeable emergencies;
  • loans;
  • plan to plan transfers;
  • distributions of smaller accounts to eligible participants.

However, if the optional provisions are used, the optional provisions must meet, in both form and operation, the relevant requirements under the IRC and the regulations, as well as operate in accordance with the terms of the plan, the IRS stipulates.

The IRS invites plan sponsors and other interested parties to comment on the Model Amendments.   Comments should be received by November 30, 2004.

General information about the IRS treatment of 457 plans is at,,id=111442,00.html.   A copy of the Revenue Procedure is available  here .