457 Catch-Up/Unused Limits

[Guest rbs]

I have a question about the 457 three-year catch-up. Are participants able to count the unused limits in years they were eligible, but did not contribute to the plan? That is, if a participant was eligible to contribute for 20 years, but only contributed for the last 5, can he count the 15 year's limits that were not used in his unused limitation, or only the unused in the 5 years he actually contributed?

[MGB]

According to the proposed regulations (see 1.457-4©(3)(iii)), any year after 12/31/78 which a participant was eligible to participate and was subject to a limit may be counted. They do not need to have actually deferred.

Note that the limit in those years is the lesser of the applicable dollar limit that year and one-third of the applicable compensation that year. Then, to determine the unused limit, you need to subtract all coordinated deferrals in years prior to 2002. So, if they had a 403(B) or 401(k) plan, those deferrals are counted against the limit for pre-2002.