How long must a company wait following the termination of a 457(b) plan and distribution of all assets before starting a new 457(b) plan?
For 401(k) plans, you have to wait at least 12 months following termination and distribution of assets. 409A says for nonqualified plans you must wait at least 3 years following termination and distribution of assets to start a similar plan. But 409A doesn't apply to 457(b) plans.
I can't find a definitive answer as to what time period would apply to the termination of a 457(b) plan.
In the present situation, a new non-profit client terminated its 457(b) plan and distributed all assets when it became frustrated with the operation of the plan (and, in part, due to a lack of understanding of the rules applicable to the plan) -- without realizing that it might still be the best option for the company's higher ups who want to defer more than permitted in their qualified plan. The termination was already accomplished before we became involved.
It seems that a minimum of at least a year would be required. I worry that the IRS will assume that the distribution was an effort to accelerate access to the plan assets even though that was not the motivation here.
Does anyone have any experience with this? Thoughts? Cites?
Thank you in advance for any insight you can provide.
