457(f) Plan

[cdavis25]

A participant reached NRA in 2012 and retired. The Plan offers one lump sum payment after the next valuation and written request by the participant. Is there an issue with amending that today to a five year payment schedule? Would they have to give the participant the option for the one lump sum payment, since they already retired?

[britoski]

Your post implies that this is a 457(f) plan and that it vested in 2012. Is that this case? If so, it should have been taxable in 2012.

If it has already been treated as taxable, I think you probably could extend the payment schedule as you propose. If it hasn't yet been taxed, I think you may have issues beyond the question your post is asking.

[cdavis25]

Sorry I should have been more specific. It is a 457(f) plan. The normal retirement date is 1/1/13. He reached NRA and stopped working on 1/1/13. I was thinking that he no longer had a substanial risk of forfeiture at this point and the distribution amount is now taxable as of 1/1/2013. So, they could not change the payment schedule for this individual. But, I might be missing something??

[kgr12]

If the vesting date and the date or event entitling the participant to payment have indeed come and gone (usually one in the same in a 457(f) plan), any opportunity to change that has probably also come and gone. (I say "if" and "probably" because there is no substitute for a close reading of the plan document.)

Moreover, since this is a 457(f) plan, you probably wouldn't have wanted to do such an amendment anyway (even if it were done ahead of time) since in a 457(f) plan the vesting date is the functional equivalent of the date when the full accrued benefit is taxed, without regard to when it is scheduled to be paid out. There might have been some small benefit in spreading out the taxation of the earnings that the plan generates subsequent to the vesting/full taxation date, but to simply spread those out over 5 years probably isn't worth the trouble.

[cdavis25]

Tks.