Footnotes

¹ Respondent determined a deficiency in petitioners' Federal income tax for 1990 in the amount of $793. The sole issue for decision is

² provides in relevant part: 3. The Coordinator shall be subject to PERS [Public Employees Retirement System] and shall be entitled to other fringe benefits as afforded Morrow County employees. The Public Employees Retirement System of the State of Ohio (PERS) requires that a percentage of a public employee's compensation be withheld by the employer for contribution to a retirement plan. Ohio Rev. Code Sec. 145.01 and 145.47 (Baldwin 1996). Under section 145.03 of the Ohio Revised Code, membership

³ Sec. 219(g)(2) and (3). This provision results in a total disallowance of the IRA deduction where the total modified AGI reported on a joint return exceeds $50,000. See Felber v. Commissioner , T.C. Memo. 1992-418, affd. without published opinion 998 F.2d 1018 (8th Cir. 1993). Petitioner contends that he is entitled to a deduction for his entire IRA contribution because PERS is an eligible deferred compensation plan. Petitioner argues, therefore, that he is not an "active participant" within the meaning of section 219(g)(5). As relevant herein, a deferred compensation plan is defined by section 457 as a plan established and maintained by a State, political subdivision of a State, agency, or instrumentality thereof, or any other nongovernmental organization exempt from

⁴ In addition, PERS expressly confines its terms and provisions to the limitations established by section 415 of the Internal Revenue Code which prescribes limitations on benefits and contributions under qualified plans, not deferred compensation plans. Sec. 145.01, Ohio Rev. Code (Baldwin 1996). Finally, the State of Ohio maintains an eligible deferred compensation plan in accordance with the requirements, and subject to the limitations of section 457. The deferred compensation plan is found in section 145.73 of the Ohio Revised Code, and is separate and distinct from PERS. Therefore, we conclude that PERS is not an eligible deferred compensation plan within the meaning of section 457. Petitioner further argues that participation in PERS should not preclude a deduction of his IRA contribution in that PERS is a substitute for Social Security in Ohio, and taxpayers that have amounts withheld from their wages for Social Security are not precluded from deducting IRA contributions. However, the Form W2 that petitioner received from the Morrow County Prosecuting Attorney for 1990 reflects that $22.85 was withheld from his wages as Social Security tax. As such, we find that petitioner's argument is without merit.

⁵ Eanes involved a taxpayer who forfeited all rights under an employer's retirement plan when he left after only 3 months. Despite the short time the taxpayer worked, we held that he was an active participant in his employer's plan and was not entitled to a

⁶ tax, that permits employees to contribute a portion of their monthly salary through payroll deductions. The annual amount an employee may contribute is limited, and contributions are not includable in an employee's gross income in the year earned, but is deferred until paid out or made available to the employee. Sec. 457(a). We discussed the distinctions between section 401(a) qualified plans and section 457 plans in Rheal v. Commissioner , T.C. Memo. 1989-525: Qualified plans are required to comply with numerous eligibility standards set forth in section 401(a). These include nondiscrimination standards and minimum participation, funding, and vesting standards. Sections 401(a)(3), (4), (7); 411 and 412. Section 457 plans, however, are not subject to these requirements in general and are, therefore, referred to as a type of nonqualified plan. The litany of distinctions between a section 457 plan and qualified plans is too extensive to warrant exhaustive discussion here. One significant distinction noted is that a qualified plan requires employees' benefits to be held in an employees' trust and in all events an employee's right to his accrued benefit derived from his own contributions must be nonforfeitable. Sections 401(a)(7) and 411(a). By contrast, a section 457 plan is not required to utilize an employee's trust and by definition is prohibited from establishing an employee's trust which provides for nonforfeitable benefits. A section 457 plan, therefore, does not constitute a qualified plan because it necessarily violates qualified plan requirements. [Fn. ref. omitted.] In light of the foregoing, petitioner's contention that PERS is a deferred compensation plan within the meaning of section 457 is without merit. The PERS member handbook states that PERS is a qualified pension plan and notes that tax provisions exclusive to distribution from qualified plans and trusts may be applicable to distributions from PERS, including an early withdrawal penalty

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⁹ deduction under section 219. We stated: "While the result to petitioner seems harsh, we cannot ignore the plain language of the statute and, in effect, rewrite this statute to achieve what would appear to be an equitable result." Eanes v. Commissioner , supra at 171 (citing Hildebrand v. Commissioner , supra at 59). We apply this reasoning to the facts of the instant case. Based on the foregoing, we conclude that PERS is a qualified plan established by the State of Ohio and that petitioner was an "active participant" in PERS during 1990. Accordingly, because their modified AGI for 1990 exceeded $50,000, petitioners are not entitled to a deduction of their IRA contributions. Sec. 219(g)(1) and (2). Respondent is sustained on this issue. Decision will be entered for respondent .