Tax-exempt 457(b) and Legislative Amendments

[DTH]

When does a tax-exempt 457(b) plan need to adopt legislative amendments (e.g., WRERA, HEART)?

[30Rock]

There were some prior discussions on this. The only amendment we concluded necessary was adding differential pay to definition of Includible Compensation. Then decision is yours as to whether to make it mandatory or give employer option to exclude differential pay. Other amendments could create current availability issues subjecting affected participants to taxation so great care is needed when drafting top hat plan language.

[DTH]

Thanks 30Rock. When would the plan amendment needed to be adopted for differential pay? Thanks.

[30Rock]

It became a mandatory provision under HEART in 2010 for 415 purposes, but it is optional for plan compensation purposes. Provision became effective after 2008, but plans had until the end of the 2010 plan year to amend. But if employer did not pay differential pay, then it is a moot point and no amendment is necessary. And most likely no harm done since Includible comp under 415 was already changed per statute to include differential pay. Amendment just puts employer on notice that employees have option to defer on those amounts. Amendment could still be effective for 2010 and signed now with a Board resolution ratifying the amendment effective as of a 2010 date