I
104TH CONGRESS
2D SESSION
H. R. 3209
To amend the Internal Revenue Code of 1986 to increase the maximum
amount deferrable under a 457 plan for any year to the amount defer-
rable for such year under a 401(k) plan, and to require that amounts
in 457 plans be held in trust.
IN THE HOUSE OF REPRESENTATIVES
MARCH 29, 1996
Mr. BEREUTER introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to increase
the maximum amount deferrable under a 457 plan for
any year to the amount deferrable for such year under
a 401(k) plan, and to require that amounts in 457
plans be held in trust.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. INCREASE OF MAXIMUM AMOUNT DEFER-
RABLE UNDER 457 PLAN TO AMOUNT DEFER-
RABLE UNDER 401(K) PLAN FOR SAME YEAR
AND REQUIREMENT THAT AMOUNTS IN 457
PLANS BE HELD IN TRUST.
(a) INCREASE IN AMOUNT DEFERRABLE UNDER 457
PLAN.—
(1) IN GENERAL.—Subparagraph (A) of section
457(b)(2) of the Internal Revenue Code of 1986 (re-
lating to deferred compensation plans of State and
local governments and tax-exempt organizations) is
amended to read as follows:
‘‘(A) the limitation in effect for such tax-
able year under section 402(g)(1), or’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to taxable years begin-
ning after the date of the enactment of this Act.
(b) TRUST REQUIREMENT.—
(1) IN
GENERAL.—Paragraph (6) of section
457(b) of such Code (relating to eligible deferred
compensation plan defined) is amended by striking
the text following subparagraph (C) and inserting
the following:
‘‘shall be held in trust for the exclusive benefit of
participants and their beneficiaries until made avail-
able to participants or their beneficiaries.’’
(2) SPECIAL RULES FOR TRUSTS.—Section 457
of such Code is amended by adding at the end the
following new subsection:
‘‘(g) TRUSTS AND PARTICIPANTS.—
‘‘(1) TAXABILITY
OF
TRUSTS
AND
PARTICI-
PANTS.—For purposes of this title—
‘‘(A) a trust described in subsection (b)(6)
shall be treated as an organization exempt from
taxation under section 501(a), and
‘‘(B) notwithstanding any other provision
of this title, amounts in the trust shall be in-
cludible in the gross income of participants and
beneficiaries only to the extent, and at the time,
provided in this section.
‘‘(2) CUSTODIAL ACCOUNTS AND CONTRACTS.—
For purposes of this subsection and subsection
(b)(6), custodial accounts and contracts described in
section 401(f) shall be treated as trusts under rules
similar to the rules under section 401(f).’’
(3) EFFECTIVE DATES.—
(A) STATE AND LOCAL GOVERNMENTS.—
In the case of an eligible employer (within the
meaning of section 457(e)(1) of such Code)
which is a State, political subdivision of a State,
or any agency or instrumentality of a State or
political subdivision of a State, the amendments
made by this subsection shall apply to assets
and income described in section 457(b)(6) of
such Code and held by a plan on and after the
earlier of—
(i) the date which is 90 days after the
close of the 1st session of the legislature of
such State which begins after the date of
the enactment of this Act, or
(ii) January 1, 1998.
(B) TAX EXEMPT ORGANIZATIONS.—In the
case of an eligible employer (within the meaning
of section 457(e)(1) of such Code) not described
in subparagraph (A), the amendments made by
this subsection shall apply to assets and income
described in section 457(b)(6) of such Code and
held by a plan on and after January 1, 1998.
Æ