MODIFICATIONS TO SECTION 457.

SEC. 6064. MODIFICATIONS TO SECTION 457. (a) Codification of Exception for Certain Plans.— (1) Subsection (e) of section 457 of the 1986 Code (as amended by section 1107 of the Reform Act) is amended by adding at the end thereof the following new paragraph: “(11) Certain plans excepted.—Any bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plan shall be treated as a plan not providing for the deferral of compensation.” (2) Subsection (d) of section 457 of the 1986 Code (as in effect on the day before the date of the enactment of the Reform Act) is amended by adding at the end thereof the following new paragraph: “(10) Certain plans excepted.—Any bona fide vacation leave, sick leave, compensatory time, severance pay, disability 102 STAT. 3701pay, or death benefit plan shall be treated as a plan not providing for the deferral of compensation.” (b) Treatment of Nonelective Deferred Compensation of Nonemployees.— (1) Subsection (e) of section 457 of the 1986 Code (as amended by section 1107 of the Reform Act) is amended by adding at the end thereof the following new paragraph: “(12) Exception for nonelective deferred compensation of nonemployees.— “(A) In general.—This section shall not apply to nonelective deferred compensation attributable to services not performed as an employee. “(B) Nonelective deferred compensation.—For purposes of subparagraph (A), deferred compensation shall be treated as nonelective only if all individuals (other than those who have not satisfied any applicable initial service requirement) with the same relationship to the payor are covered under the same plan with no individual variations or options under the plan.” (2) Subsection (d) of section 457 of the 1986 Code (as in effect on the day before the date of the enactment of the Reform Act) is amended by adding at the end thereof the following new paragraph: “(11) Exception for nonelective deferred compensation of nonemployees.— “(A) In general.—This section shall not apply to nonelective deferred compensation attributable to services not performed as an employee. “(B) Nonelective deferred compensation.—For purposes of subparagraph (a), deferred compensation shall be treated as nonelective only if all individuals (other than those who have not satisfied any applicable initial service requirement) with the same relationship to the payor are covered under the same plan with no individual variations or options under the plan.” (c) Section Not To Apply to Church Plans.—Section 457(e) of the 1986 Code (as amended by section 1107 of the Reform Act) is amended by adding at the end thereof the following new paragraph: “(13) Exception for church plans.—The term ‘eligible deferred compensation plan’ shall not include a plan maintained by a church for church employees. For purposes of this paragraph, the term ‘church’ has the meaning given such term by section 3121(w)(3)(A), including a qualified church-controlled organization (as defined in section 3121(w)(3)(B)).” (d) Effective Date.— (1) In general.—The amendments made by this section shall apply to taxable years beginning after December 31, 1987. (2) Exception for certain collectively bargained plans.— (A) In general.—Section 457 of the 1986 Code (as in effect before and after the amendments made by section 1107 of the Reform Act) shall not apply to nonelective deferred compensation provided under a plan in existence on December 31, 1987, and maintained pursuant to a collective bargaining agreement. (B) Nonelective plan.—For purposes of this paragraph, a nonelective plan is a plan which covers a broad group of employees and under which the covered employees earn 102 STAT. 3702nonelective deferred compensation under a definite, fixed and uniform benefit formula. (C) Termination.—This paragraph shall cease to apply to a plan as of the effective date of the first material modification of the plan agreed to after December 31, 1987. (3) Treatment of certain nonelective deferred compensation.— Section 457 of the 1986 Code shall not apply to amounts deferred under a nonelective deferred compensation plan maintained by an eligible employer described in section 457(e)(1)(A) of the 1986 Code (as in effect after the Reform Act)— (A) if such amounts were deferred from periods before July 14, 1988, or (B) if— (i) such amounts are deferred from periods on or after such date pursuant to an agreement which— (I) was in writing on such date, and (II) on such date provides for a deferral for each taxable year covered by the agreement of a fixed amount or of an amount determined pursuant to a fixed formula, and (ii) the individual with respect to whom the deferral is made was covered under such agreement on such date. Subparagraph (B) shall not apply to any taxable year ending after the date on which any modification of the amount or formula described in subparagraph (B)(i)(II) agreed to in writing before January 1, 1989, is effective. The preceding sentence shall not apply to a modification agreed to in writing before January 1, 1989, which does not increase any benefit of a participant. Amounts described in the first sentence of this paragraph shall be taken into account for purposes of applying section 457 of the 1986 Code to other amounts deferred under any eligible deferred compensation plan. (4) Study.—The Secretary of the Treasury or his delegate shall conduct a study on the tax treatment of deferred compensation paid by State and local governments and tax-exempt organizations (including deferred compensation paid to independent contractors). Not later than January 1, 1990, the Secretary shall submit to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a report on the study conducted under this paragraph together with such recommendations as he may deem advisable.