What You Need to Know About 457 Plans

May 17, 2011

Does your organization have a 457 eligible deferred compensation plan?  Are you recognizing unrealized gains and loss for the change in fair value? Well, you should be.

According to code section 457, the plan assets shall remain solely the property and rights of the employer subject to the claims of general creditors, therefore the plan assets should be adjusted for fair value and unrealized gains and losses should be recognized according to FASB Codification 958-320-35.

FASB Codification 958-320-35-1, states that “Investments in equity securities with readily determinable fair values and all investments in debt securities shall be measured at fair value in the statement of financial position”.

Because the plans assets are the sole property of the employer changes is fair value should be recognized until the assets are transferred to and become the property of the participant. The unrealized gain or loss will have a corresponding increase or decrease in a salary related expense and should be recorded in the period adjusted.

According to FASB codification 710-10-25-9, the costs associated with an individual year of the employee’s service should be recognized in that year.

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