On June 22, 2016, the IRS and Treasury Department issued proposed rulemaking on Deferred Compensation Plans of State and Local Governments and Tax-Exempt Entities (Code section 457 457(b) and 457(f)). As reported by Integrated Health Strategies:

“These proposed regulations, which the IRS notes can be relied on immediately when making decisions on current plans, now specify in greater detail when amounts deferred under these plans are includible in income, the amounts that are includible, and the types of plans that are excluded. Before the new regulations become final, the IRS is holding a public comment period that closes September 20, and a public hearing on October 18. Thereafter, based on feedback, the IRS may or may not make further adjustments to the proposed regulations, and will then issue final regulations. The regulations could become effective as early as January 1, 2017, if final regulations are published by year-end 2016. If the IRS misses the January 1, 2017 date, the next possible effective date would not be until January 1, 2018.” See Integrated Healthcare Strategies, Alert Advisor, and webinar

Ropes & Gray notes: “The proposed regulations do not “grandfather” existing arrangements or offer a transition period to conform to the proposed or final regulations. Thus, while new arrangements generally should be designed with an eye to compliance with the proposed rules, decisions about existing arrangements will be more complex.” See “New Proposed Rules for Deferred Compensation Plans for Tax –Exempt and Governmental Employers,” Rope&Gray alert, July 11, 2016.
Plans should be reviewed for the impact of these regulations and also their interaction with Code Section 409A.
Proposed Rules are here.