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USERRA and 457(b) Plans


Guest KCW

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I understand the USERRA applies to 457 plans. Does that mean that the deferral limits for a returning employee allow him to do "make-up" deferrals for a prior year while still making the maximum deferrals in the current year?

Let's assume:

The employee goes into the military for the entire year of 2002 (when the max deferral limit is $11k/100% of includible compensation).

The employee returns to work for the entire year of 2003 (when the max deferral limit is $12k/100% of includible compensation).

The employee qualifies for coverage under USERRA.

Can the employee then defer a total of $23k/100% of includible compensation* in 2003?

* 100% of 2002/2003, or just 2003 includible compensation?

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Our 457 provider gave me the following info:

The employee's maximum deferral in 2003 would be $12k/100% of includible 2003 compensation plus $11k/100% of includible 2002 compensation.

Under these circumstances, 2003 includible compensation would be "deemed" to be the pay the employee would have been paid by the employer in 2003.

She confirmed my contention that the pay "he would have been paid" is either his regular pay for the period, or if that is difficult to determine because of overtime, etc., or his average pay for the 12 months prior to his military leave.

"Includible compensation" is reported taxable income after 457 deductions; usually up to 50% of taxable income after a reduction of pre-tax items.

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