The Governmental Accounting Standards Board proposed new accounting and financial reporting guidance Friday on deferred compensation plans under Section 457 of the tax code.

The proposal aims to enhance the relevance, consistency, and comparability of accounting and financial reporting by pension plans, including Section 457 plans, and by state and local governments that offer benefits through such plans. It says that if a Section 457 plan meets the definition of a pension plan under GASB guidance, the appropriate GASB pension standards should be applied to the financial reporting for that plan and for the benefits provided through the plan. Under the existing guidance, Section 457 plans are explicitly excluded from the pension standards.

The proposed statement would supersede the remaining provisions of Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, as amended, in terms of the investment valuation requirements for Section 457 plans. The proposal would require investments of all Section 457 plans to be valued as of the end of the plan’s reporting period under all circumstances, which is required for all other postemployment benefit plans.

Provisions of the proposed standard would take effect for fiscal years starting after Dec. 15, 2020, and reporting periods afterward. GASB is encouraging early application of the standard. It is looking for comments on the proposal by Sept. 27, 2019.

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