457(b)(3) catch-up in retirement year

[Ken Davis]

I've been told by a vendor that the 3-year catch-up in 457(B)(3) may not be used in the year of retirement. And I would agree with this in a case where the employee retires on or after attaining normal retirement age.

But what if the employee retires before attaining normal retirement age? What's to prevent the employee from using the catch-up in the retirement year, as long as the retirement year is one of the three taxable years ending before the year the employee would attain normal retirement age? The IRC states "1 or more of the particlpant's last three taxable years ending before he attains normal retirement age . . . ." It doesn't state "1 or more of the participant's last three taxable years ending before the year in which he retires . . . ." Assume the vendor's plan language regarding the catch-up provision is identical to 457(B)(3).

Thanks in advance for any replies.

Ken Davis

Univ. of South Alabama

[Everett Moreland]

You are right; the vendor is wrong.