Section 457A of the Internal Revenue Code | Practical Law

Section 457A of the Internal Revenue Code | Practical Law

Section 457A of the Internal Revenue Code (Code) limits the payment of nonqualified deferred compensation by certain "nonqualified entities" that are indifferent about when they get a tax deduction for the compensation expense.

Section 457A of the Internal Revenue Code

Practical Law Legal Update 8-610-6685 (Approx. 2 pages)

Section 457A of the Internal Revenue Code

by Practical Law Employee Benefits & Executive Compensation
Published on 28 Apr 2015 • USA (National/Federal)
Section 457A of the Internal Revenue Code (Code) limits the payment of nonqualified deferred compensation by certain "nonqualified entities" that are indifferent about when they get a tax deduction for the compensation expense.
Section 457A of the Internal Revenue Code (Code) limits the payment of nonqualified deferred compensation by certain "nonqualified entities" that are indifferent about when they get a tax deduction for the compensation expense.
While Section 457A was primarily targeted at the deferral of compensation by US managers of offshore hedge funds, it has implications for a broader group. Section 457A may also be of concern to:
  • Multinational employers with subsidiaries in multiple jurisdictions.
  • Employees who move among various jurisdictions over the course of their careers (expats).
  • Entities with worldwide compensation plans that do not distinguish between US and foreign employees.
  • Certain partnerships.
To learn more about Section 457A, including the relationship between Section 457A and Code Section 409A, see Practice Note, Section 457A of the Internal Revenue Code: Overview. This Note was contributed by Jason R. Factor, Cleary Gottlieb Steen & Hamilton LLP, with Practical Law Employee Benefits & Executive Compensation, with special thanks to Josiah Child and Erica E. Bonnett, Cleary Gottlieb Steen & Hamilton LLP.