Section 457(f) Regulations -- Getting Closer to Publication?

After nearly a year's silence, Cheryl Press, an IRS Senior Attorney working on the regulations, addressed the regulations on March 10, 2011. Speaking at a conference, she did not address when the regulations might be issued, but instead described a couple of provisions that had not previously been discussed. In addition to addressing substantial risks of forfeiture (presumably moving to the Section 409A non-elective, cliff vesting only model), Ms. Press said that the regulations will also cover illness and vacation leave, and what they require to be deemed "bona fide" arrangements that are exempt from the substantial risk of forfeiture requirement. Regarding the illness and vacation leave, she expressed concern that these arrangements are being used to increase 403(b) deferrals (presumably the ability to convert illness and vacation leave accruals to 403(b) contributions at the time of termination), or to be a type of "savings account" where the participant can take funds out and put them back in.

The last word we had from Ms. Press regarding the timing of the regulations was in April 2010, when she said the regulations were "substantially done." The new comments may signal they are not so far away from being published. But then again ...