Commencement of 457(b) distributions

[Guest lkazden]

We are implementing a 457(B) plan for the top hat group of a non-profit organization. The plan document states that distributions must commence "on a date selected by the Participant during the sixty day period following Severance of Employment, unless the Participant subsequently makes a one time additional written election in accordance with Code section 457(B) to defer commencement of benefits to a specified later date.

Are these the only options for commencing distributions under a 457(b)top hat plan? Also,for the one time written election, does the person have to give the exact date they want the distributions to commence and is that irrevocable? For example, a person states he wants the distribution to start at age 67 and then he cannot change it?

I would appreciate your input!

[Guest Tom Geer]

The only element that's not mandated by 457 is the 60 days. 457 generally requires fixed dates for commencement and form of benefits, but there are three exceptions, for unforeseeable emergency, one-time elections to receive up to $5000 and one-time elections to defer commencement after an event allowing distribution has occurred.

This third type is the type your plan contemplates. Under 457(d)(9)(B), this has to be a one-time election to a fixed or determinable future date. The 60 days is not mandatory, because the statutory rule is before payment commencement, but the plan has to have some start date for people who don't elect to defer commencement and 60 days is a reasonable number to set for that.

[Guest lkazden]

Thomas,

Thank you for your prompt reply. So, if the person separates from employment and does not elect to defer within the 60 days, it is allowable to distribute the funds in the lump sum?

LKazdzen