### Question
How is the "eligible deferred compensation plan" defined?


### Answer
The term **eligible deferred compensation plan** is defined in *26 U.S.C. § 457* as follows -

> a plan established and maintained by an eligible employer—


(1) in which only individuals who perform service for the employer may be participants,


(2) which provides that (except as provided in paragraph (3)) the maximum amount which may be deferred under the plan for the taxable year (other than rollover amounts) shall not exceed the lesser of—


(A) the applicable dollar amount, or


(B) 100 percent of the participant's includible compensation,


  

(3) which may provide that, for 1 or more of the participant's last 3 taxable years ending before he attains normal retirement age under the plan, the ceiling set forth in paragraph (2) shall be the lesser of—


(A) twice the dollar amount in effect under subsection (b)(2)(A), or


(B) the sum of—


(i) the plan ceiling established for purposes of paragraph (2) for the taxable year (determined without regard to this paragraph), plus


(ii) so much of the plan ceiling established for purposes of paragraph (2) for taxable years before the taxable year as has not previously been used under paragraph (2) or this paragraph,


  

(4) which provides that compensation will be deferred for any calendar month only if an agreement providing for such deferral has been entered into before the beginning of such month,


(5) which meets the distribution requirements of subsection (d), and


(6) except as provided in subsection (g), which provides that—


(A) all amounts of compensation deferred under the plan,


(B) all property and rights purchased with such amounts, and


(C) all income attributable to such amounts, property, or rights,


  

shall remain (until made available to the participant or other beneficiary) solely the property and rights of the employer (without being restricted to the provision of benefits under the plan), subject only to the claims of the employer's general creditors

#### Citation:
  - *26 U.S.C. § 457*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter E-Accounting Periods and Methods of Accounting > PART II-METHODS OF ACCOUNTING > Subpart B-Taxable Year for Which Items of Gross Income Included**

