[Code of Federal Regulations] [Title 26, Volume 6] [Revised as of April 1, 2002] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR1.457-3] [Page 159] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) DEFERRED COMPENSATION, ETC.--Table of Contents Sec. 1.457-3 Tax treatment of participants where plan is not an eligible plan. (a) In general. If a State (within the meaning of Sec. 1.457-2(c)) provides for a deferral of compensation (after the effective date described in paragraph (c)) under any agreement or arrangement described in Sec. 1.457-2(b) that is not an eligible plan within the meaning of Sec. 1.457-2-- (1) Compensation deferred under the agreement or arrangement shall be includible in the gross income of the participant of beneficiary for the first taxable year in which there is no substantial risk of forfeiture (within the meaning of section 457(e)(3)) of the rights to such compensation, (2) Earnings credited on the compensation deferred under the agreement of arrangement shall be includible in the gross income of the participant or beneficiary only when paid or made available, provided that the interest of the participant or beneficiary in the assets (including amounts deferred under the plan) of the entity sponsoring the plan is not senior to the entity's general creditors, and (3) Amounts paid or made available under the plan to a participant or beneficiary shall be taxable to the participant or beneficiary under section 72, relating to annuities. (b) Exceptions. Paragraph (a) does not apply with respect to-- (1) A plan described in section 401(a) which includes a trust exempt from tax under section 501(a), (2) An annuity plan or contract described in section 403, (3) A qualified bond purchase plan described in section 405(a), (4) That portion of any plan which consists of a transfer of property described in section 83, and (5) That portion of any plan which consists of a trust to which section 402(b) applies. (c) Effective date. This section is effective for taxable years beginning after December 31, 1981. For rules applicable in taxable years beginning after December 31, 1978, and before January 1, 1982, see Sec. 1.457-4. [T.D. 7836, 47 FR 42341, Sept. 27, 1982; 47 FR 46497, Oct. 19, 1982]