Tax Facts

3607 / What tax rules apply to nonqualified deferred compensation plans covering state judges?

The participants in a governmental nonqualified deferred compensation plan covering state judges are taxed under the rules applicable to funded or unfunded nonqualified deferred compensation plans [but a plan is not subject to the requirements of 457 as deferred compensation, especially 457(f)] if:

(1)   the plan has been continuously in existence since December 31, 1978;

(2)   the plan requires all eligible judges to participate and contribute the same fixed percentage of their basic or regular compensation;

(3)   the plan provides no judge with an option as to contributions or benefits, which, if exercised, would affect the amount of his or her includable compensation;

(4)   retirement benefits under the plan are a percentage of the compensation of judges holding similar positions in the state; and

(5)   benefits paid to any participant in any year do not exceed the limitation of IRC Section 415(b) ( Q 3868).1

However, plans for judges that do not meet these conditions must comply with requirements of a Section 457(b) eligible or 457(f) ineligible plan, as applicable.





1.   Rev. Act of 1978 § 131 (as amended by TEFRA 1982 § 252); TRA 1986 § 1107(c)(4); PL 97-514 (TEFRA), Section 252, and reaffirmed in Prop. Treas. Reg. Section 1.457-11(b)(1), REG 1147197, June 22, 2016. See also Foil v. Comm., 91-1 USTC ¶ 50,016 (5th Cir. 1990); Yegan v. Comm., TC Memo 1989-291.


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