5th Edition of the 457 Answer Book

[J Simmons]

I have the 4th Edition, and am wondering what's new in the 5th Edition (i.e., whether it's worth the investment to update). If I buy, will I have to pay for a supplement when the 457f regs come out and are analyzed, or will that be provided no-charge to the 5th Ed purchasers? I wonder if maybe Gary Lesser and Peter Gulia could enlighten me before I make the decision to buy or not to buy the 5th Edition.

[JanetM]

Preface for online edition (5th) is dated May 2007 says the following.

The 457 Answer Book covers all aspects of eligible and ineligible 457 plans, including the dramatic changes made by the final regulations to Code Section 457, the Pension Protection Act of 2006 (PPA), the American Job Creation Act of 2004 (the JOBS Act), and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPA). The final regulations reflect the changes made to Code Section 457 by the Tax Reform Act of 1986 (TRA '86), the Small Business Job Protection Act of 1996 (SBJPA), the Taxpayer Relief Act of 1997 (TRA '97), the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the Job Creation and Worker Assistance Act of 2002 (JCWAA), and other legislation.

The final regulations under Code Section 457 made numerous technical changes and some clarifications to the rules regarding excess deferrals; self-correction for excess deferrals to eligible plans of tax-exempt employers; reporting distributions of excess deferrals; aggregation rules for plan eligibility purposes; the deferral of sick, vacation, and back pay; unforeseeable emergency distributions; plan terminations; plan-to-plan transfers; rollovers; the ordering of partial distribution from plans containing rolled-over assets; and the effect of deemed IRAs on plan qualification. The JOBS Act substantially affects ineligible deferred compensation plan rules and deferred compensation planning (see chapter 11). The BAPA extended protection in bankruptcy for most retirement funds governed by Code under Code Section 457 (see chapter 9).

Nearly all of the chapters have been updated by their authors to address recent 457 guidance and related issues. In chapter 11 on ineligible plans, David Pratt expands his coverage of the major changes that resulted from the American Jobs Creation Act of 2004 on ineligible plans under Code Section 409A. In chapter 14 on Miscellaneous Issues (which is actually on the "odd and unusual"), Carol Calhoun expands her coverage of plan choice alternatives and adds a section on military reemployment, service credit, and make-up contribution rights under USERRA.

[Gary Lesser]

Of course you should purchase the new 2007 hardcover edition of the 457 Answer Book. :-) Several new authors have made contributions (see below). As supplements are issued (generally for next two years), they will refer to and update the 5th edition.

This year we welcome new authors L. Joan Albrecht, Mary Beth Braitman, Alex M. Brucker, Michael Cotter, Linda Russano Morra, and Terry A.M. Mumford.

The 5th edition also includes two new chapters. In new chapter 15, Michael Cotter explains how retirement plan sponsors can correct operational and/or document failures to avoid loss of tax-qualified status under the EPCRS program as it applies to an eligible plan intended to satisfy the requirements of Code Section 457. In new chapter 16, Mary Beth Braitman and Terry A.M. Mumford bring together all of the issues that would concern a retirement system or board, or an individual or company, that administers an eligible or ineligible plan under Code Section 457.

Highlights of the Fifth Edition (released 2007)

457 Answer Book, Fifth Edition brings the practitioner up to date on legislative and regulatory developments and changes, including the following:

• How the Pension Protection Act of 2006 (PPA) effects 457 plan participants:

• Nonspouse beneficiary rollovers to inherited IRAs from eligible governmental 457 plans.

• New rules that allow certain direct rollovers from an eligible governmental 457 plan to a Roth IRA.

• When a direct rollover from an eligible governmental 457 plan is subject to the $100,000 adjusted gross income limitation.

• When a participant can purchase permissive service credits that they would not otherwise be entitled to under a governmental 457 plan.

• Whether a participant has suffered a financial hardship when medical events occur involving the participant’s spouse or dependents.

• How an eligible governmental 457 plans can meet the required minimum distribution (RMD) rules.

• Whether an individual that received a distribution prior to 1997 is precluded form participating in an eligible deferred compensation plan.

• How the Economic Growth and Tax Relief Reconciliation Act (EGTRA) changes that were made permanent under the PPA effect the coordination of the maximum deferral amount, early distributions pursuant to a qualified domestic relations order (QDRO), and rollovers.

• Which deferred compensation plans are not affected by Internal Revenue Code Section 409A?

• How the re-employment, service credit, and make-up contribution rules work with respect to a period of military service under USERRA.

• The tax-law change that allows deferrals from post-severance pay.

• Why many local government employers’ plans cannot invest in a stablevalue fund.

• When a directed trustee has a duty to disobey directions.

• Whether a plan administrator needs to use a lawyer licensed in a particular state when the plan administrator needs advice or an opinion on that state’s law in order to resolve a claim, or find whether a domestic relations order should be recognized.

• The most common mistakes people make with beneficiary designations.

• The tax treatment of a distribution paid under a domestic-relations order that is recognized under the plan, but might not be recognized as a qualified order under federal law because the marriage or relationship dissolved was between same-sex spouses.

• How the bankruptcy rules under BAPA apply to an eligible 457 plan and why they don’t apply to an ineligible 457 plan.

6/07

Preface

The 457 Answer Book covers all aspects of eligible and ineligible 457 plans, including the dramatic changes made by the final regulations to Code Section 457, the Pension Protection Act of 2006 (PPA), the American Job Creation Act of 2004 (the JOBS Act), and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPA). The final regulations reflect the changes made to Code Section 457 by the Tax Reform Act of 1986 (TRA ’86), the Small Business Job Protection Act of 1996 (SBJPA), the Taxpayer Relief Act of 1997 (TRA ’97), the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the Job Creation and Worker Assistance Act of 2002 (JCWAA), and other legislation.

The final regulations under Code Section 457 made numerous technical changes and some clarifications to the rules regarding excess deferrals; self correction for excess deferrals to eligible plans of tax-exempt employers; reporting distributions of excess deferrals; aggregation rules for plan eligibility purposes; the deferral of sick, vacation, and back pay; unforeseeable emergency distributions; plan terminations; plan-to-plan transfers; rollovers; the ordering of partial distribution from plans containing rolled-over assets; and the effect of deemed IRAs on plan qualification. The JOBS Act substantially affects ineligible deferred compensation plan rules and deferred compensation planning (see chapter 11). The BAPA extended protection in bankruptcy for most retirement funds governed by Code under Code Section 457 (see chapter 9).

457 Answer Book, Fifth Edition is written by a team of practicing experts, preeminent in their fields, who take subscribers step-by-step through the life cycle of a 457 plan. You will learn how to:

• Recognize which plans and which types of employers are subject to Code Section 457. Grandfathered plans, severance pay plans, and other coverage exceptions are also discussed.

• Apply eligibility requirements, contribution and deferral limits, and when to make unforeseeable emergency withdrawals and distributions.

• Design a plan so that it remains an eligible plan even if an excess contribution is made.

• Recognize whether investment education is investment advice and how to use trust law principles to shift some of the fiduciary responsibility to participants.

• Determine what happens when 457(b) plans are merged, assets are transferred, or employees with plans are acquired.

• Determine the effects of a 457(b) plan termination and when and how participants are taxed.

• Apply the rules that govern the timing, taxation, and rate of distribution applicable to an eligible 457 plan, as well as minimum distribution requirements, and in-service and unforeseeable emergency withdrawals.

• Understand what a trust’s fiduciary income is and how it is adjusted and allocated.

• How to comply with the automatic rollover rules for plans that provide for mandatory distributions.

• Recognize securities and insurance law issues and why being subject to ERISA is a potential problem.

Nearly all of the chapters have been updated by their authors to address recent 457 guidance and related issues. In Chapter 11 on ineligible plans, David Pratt expands his coverage of the major changes that resulted from the American Jobs Creation Act of 2004 on ineligible plans under Code Section 409A. In chapter 14 on Miscellaneous Issues (which is actually on the “odd and unusual”), Carol Calhoun expands her coverage of plan choice alternatives and adds a section on military reemployment, service credit, and make-up contribution rights under USERRA.

457 Answer Book includes several appendixes to aid 457 plan practitioners, a number of which have been updated or are new. Among the key documents provided are the following:

• Extracts of pertinent sections of the Internal Revenue Code

• The final 457 Treasury Regulations

• Private letter rulings

• A model state statute and a specimen top-hat statement

• A model 457(f) plan for a church hospital

• Indexed employee benefit limits

Gary S. Lesser

David W. Powell

Peter J. Gulia