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457 Catchup Provision


Guest David Jamieson
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Guest David Jamieson

Sec. 457(B)(3) allows for increased employee 457 contributions, up to a possible maximum of$15,000 per year, in the 3 tax years prior to year the employee "attains normal retirement age under the plan." When an employee can retire under the state government's standard retirement plan with 25 years of service and reaching 55 years of age, but can stay on indefinately beyond that time before actually retiring, when is the 3 tax years prior to the year the employee "attains normal retirement age under the plan" when the catchup provision can be used?

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Guest CVCalhoun

Typically under qualified plans of private employers, "normal retirement age" is the later of (a) the age at which benefits payable to a participant who terminates employment are no longer reduced on account of early retirement or (B) the date specified in the plan as normal retirement age. Treas. Reg. § 1.411(a)-7(B). By analogy, a similar rule should apply for purposes of the catch-up. Indeed, the fact that an employee can stay on indefinitely after attaining such an age should be irrelevant, because under the Age Discrimination in Employment Act, there typically is no bar to employees staying on until any age they choose.

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Employee benefits legal resource site

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Guest RARogers

You might want to look at the regulations on this issue - Reg. ss 1.457-2(f)(4):

"...normal retirement age may be specified in the plan. If no normal retirement age is specified in the plan, then the normal retirement age is the later of the latest normal reitrement age specified in the basic pension plan of the State, or age 65. A plan may define nra as any range of dates ending no later than age 70 1/2 and beginning no earlier than the earliest age at which the pt. has the right to retire under the State's basic pension plan without consent of the state and to receive immediate retirement benefits without actuarial or similar reduction because of retirement before some later specified age in the State's basio pension plan. The plan may further provide that in the case of a pt who continues to work beyond the ages specified in the preceding 2 sentences, the nra shall be that date or age designated by the pt, but such date or age shall ot be later than the mandatory retirement age provided by the State, or the date or age at which the pt separates from the service with the State."

Whew - that was a lot of typing. But I think your answer is here.

A lot depends upon how the 457 plan is drafted. If the plan is silent, you have to use the nra under the State's basic pension plan.

The plan can be drafted to establish a "moving" nra for this purpose (where the ee could retire at any number of dates with unreduced benefits), but the employee is required to designate the nra in this case.

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  • 1 month later...

My two cents worth:

"What is my NRA?," is one of my most often asked questions. I always respond "I don't know, you tell me." I say this because it is an age to be designated BY THE PARTICIPANT. (I do probe a little deeper than that, and I do check the plan doc to determine how it defines NRA).

Also, consider that NRA is not necessarily a set age, but rather a range of ages, and it doesn't (in fact oftentimes, it can't) equal a participant's actual year of retirement.

For example, if you have a civil servant who started working at age 20, a common age at which this person could receive unreduced benefits is age 50 (i.e. 30 years of service). This person is going to continue working. For catchup, this person can declare any age from age 50 on as NRA. Further example, this person could designate age 55 as NRA, catchup in the years the partipant turns age 52, 53, and 54, and still continue to work to age 70-1/2 and beyond, and the participant will have properly taken advantage of catchup.

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