New Standard for Deferred Compensation Plans
The Governmental Accounting Standards Board issued a final statement on reporting for deferred compensation plans adopted under provisions of Internal Revenue Code section 457. GASB Statement no. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans , is effective for periods beginning after December 31, 1998.
Section 457 enables state and local governments to establish deferred compensation plans for their employees. Before August 20, 1996, section 457 plans had to be reported in the financial statements of the government entity that sponsored the plan even if the plan's assets were administered by a third party. GASB Statement no. 2, Financial Reporting of Deferred Compensation Plans Adopted under the Provisions of Internal Revenue Code 457 , established guidelines for reporting on section 457 plans. On August 20, 1996, section 457 provisions were amended to require all plan assets and income be held in trust for the benefit of participants and beneficiaries. The amounts deferred by employees or related income on those amounts were no longer "owned" by the government entities.
GASB Statement no. 32 should reduce confusion about accounting and reporting for revised IRC section 457 plans. It rescinds Statement no. 2, replacing much of the guidance there by expanding the scope of GASB Statement no. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools , to include debt and equity investments of such plans.
Copies of Statement no. 32 are available for $10.50 each by calling
the GASB order department at 203-847-0700, ext. 555.