9.6.3 IRC Section 457 Deferred Compensation Plans
Deferred compensation plans are frequently used to provide fringe benefits (typically retirement income) to select personnel. These plans are based on the deferral of an employee's compensation to some future age or date. Investments in life insurance and annuities are authorized for these plans. Life insurance is a popular funding vehicle as the amounts deferred are used to pay premiums on cash value life insurance so that cash values are available to the employee as supplemental income at retirement.
The allowed deferred amount is 33 1/3% of the participant's applicable income or $17,000 whichever is less in 2012 ($16,500 in 2011). For the three years preceding retirement, the deferral limit in each year is considered twice the applicable limit.
