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I have a new client that is a governmental entity that sponsors a 457(b) plan for its employees. An employee has attained normal retirement age under the plan and retired. He did not take a distribution at retirement. Four months later, the individual is re-employed in a part-time position which makes him ineligible for contributing to the 457(b) plan. The employee has now asked for a distribution from the 457(b) plan. The plan provides that upon severance from employment with the entity, a participant shall be entitled to receive a distribution of his account. Severance from employment is defined as a voluntary or involuntary termination of employment. The regulations under 457 provide that an employee has a severance from employment with the eligible employer if the employee dies, retires, or otherwise has a severance from employment with the eligible employer, and directs one to see the 401(k) regulations for additional guidance concerning severance from employment. Because of the individual’s status as a rehired employee, and the reference to the 401(k) regulations, I am concluding that his rehired status makes him ineligible for a distribution now. I am being told that in the past the client has taken the position that a “retirement” is sufficient to allow for subsequent distributions, even while the individual is working for the entity as a part-time employee. I can’t find any guidance on 457 plans that would allow for a distribution based on the prior retirement when the individual is currently working for the entity, and I am wondering if the group knows of any unofficial IRS guidance on this issue.

Hello. I am new to 457 and hoping for some guidance. A tax exempt entity matches 457(b) deferrals. There is a vesting schedule causing the matching to vest and excess deferrals in years subsequent to the initial deferral. If the plan distributes the excess deferral after April 15, does this cause double taxation in a manner similar to the 401(k) plan treatment? My reading of the regulations and secondary materials suggest not. I can find nothing other than discussion relating to failure of the plan generally after April 15 and taxation of deferred amounts that are not subject to forfeiture. But if excess match is taxable in year vested and then distributed in subsequent year, how is it reported and is it taxable at distribution? Is there basis under sec. 72? A previous discussion and example were helpful but did not address matching and did not address specifics as to what is the effect of plan failure given late correction. Can someone provide an example with authority of reporting on W2 for an excess deferral caused by match vesting where distribution of excess is made in subsequent year after April 15? Thanks for any help you can provide.

We administer our payroll and most benefits (health care, 401k) under a PEO plan. We also have a 457(b) [and soon a 457(f)] Plan that the company administers because the PEO does not offer this plan. However, the employee contributions are reported to the PEO for reporting on the year end W2 reports and filing. My question -- what EIN number should be used for the 457(b) and 457(f) plans - the company's or the PEO's? We set up the 457(b) Plan under the company's EIN because it was set up before we switched to the PEO. But as I am now setting up a 457(f) the question has arisen. I think it should be the company's EIN because until risk of loss is removed the assets belong to the company - but my common sense may not be what rules the day. Advice is welcome.