Page:United States Statutes at Large Volume 100 Part 3.djvu/622

 100 STAT. 2430

PUBLIC LAW 99-514—OCT. 22, 1986

""''^ transfer of such portion from 1 eligible deferred compensation plan to another eligible deferred compensation plan. "(f) TAX TREATMENT OF PARTICIPANTS WHERE PLAN OR ARRANGEMENT OF EMPLOYER IS NOT ELIGIBLE.—

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"(1) IN GENERAL.—In the case of a plan of an eligible employer providing for a deferral of compensation, if such plan is not an eligible deferred compensation plan, then— "(A) the compensation shall be included in the gross income of the participant or beneficiary for the 1st taxable year in which there is no substantial risk of forfeiture of the rights to such compensation, and "(B) the tax treatment of any amount made available under the plan to a participant or beneficiary shall be determined under section 72 (relating to annuities, etc.). "(2) EXCEPTIONS.—Paragraph (1) shall not apply to— "(A) a plan described in section 401(a) which includes a trust exempt from tax under section 501(a), "(B) an annuity plan or contract described in section 403, "(C) that portion of any plan which consists of a transfer of property described in section 83, and "(D) that portion of any plan which consists of a trust to which section 4O20t>) applies. "(3) DEFINITIONS.—For purposes of this subsection— "(A) PLAN INCLUDES ARRANGEMENTS, ETC.—The term ' * '• 'plan' includes any agreement or arrangement. "(B) SUBSTANTIAL RISK OF FORFEITURE.—The rights of a

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person to compensation are subject to a substantial risk of forfeiture if such person's rights to such compensation are conditioned upon the future performance of substantial services by any individual." (b) CLERICAL AMENDMENT.—The table of sections for subpart B of part II of subchapter E of chapter 1 is amended by striking out the item relating to section 457 and inserting in lieu thereof the following: "Sec. 457. Deferred compensation plans of State and local governments and tax-exempt organizations." (c) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in this subsection, the amendments made by this section shall apply to taxable years beginning after December 31, 1988. (2) TRANSFERS AND CASH-OUTS.—Paragraphs (9) and (10) of

section 457(e) of the Internal Revenue Code of 1986 (as amended by this section) shall apply to taxable years beginning after December 31, 1986. (3) APPLICATION TO TAX-EXEMPT ORGANIZATIONS.—

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(A) IN GENERAL.—Except as provided in subparagraph (B), the application of section 457 of the Internal Revenue Code of 1986 by reason of the amendments made by this section to eligible deferred compensation plans established and maintained by organizations exempt from tax shall apply to taxable years beginning after December 31, 1986. (B) EXISTING DEFERRALS AND ARRANGEMENTS.—Section

457 of such Code shall not apply to amounts deferred under • 1 > a plan described in subparagraph (A) which— (i) were deferred from taxable years beginning before i *j January 1, 1987, or

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