SECURE Amendment deadline for tax-exempt 457(b) Plans

[Belgarath]

Last I knew, under IRS Notice 2024-2, the amendment deadline for these was 12-31-25 - the IRS didn't give the non-governmental plans the extended deadline available for 401(a), 401(k), and 403(b) plans. Has there been any update of this deadline that I missed? Thanks.

[Peter Gulia]

The relief the IRS describes seems available if, with other conditions, “the amendment is adopted no later than the last day of the first plan year [sic] beginning on or after January 1, 2025[.]” IRS, Miscellaneous Changes Under the SECURE 2.0 Act of 2022, Notice 2024-2, 2024–2 I.R.B. 316, 331 [middle column] (Jan. 8, 2024), https://www.irs.gov/pub/irs-irbs/irb24-02.pdf. (I’m not aware that the IRS published further relief.)

Before considering a due date for a plan amendment, consider whether the employer needs or wants an amendment.

Many plan-design features from SECURE 2019 and SECURE 2022 are not available for nongovernmental § 457(b) plans.

A plan’s document before December 2019 might state distribution provisions that meet all § 401(a)(9) conditions, even after considering all SECURE 2019 and SECURE 2022 changes.

An ERISA-governed select-group plan not governed by ERISA § 206 need not recognize domestic-relations orders, and so need not recognize a Native American Indian tribe’s order.

If the plan allows an employee to elect a deferral and allows such an election more often than yearly, an employer might amend its plan to undo a provision that “compensation will be deferred for any calendar month only if an agreement providing for such deferral has been entered into before the beginning of such month[.]”

[G8Rs]

That relief only applies to governmental 457(b) plans. There haven't been any extensions for non-governmental 457(b) plans. 

[Peter Gulia]

I confess I assumed the query’s premise without considering which kinds of plans get or lack SECURE 2022 § 501’s relief, or other tax law or IRS relief.

When my scope includes responsibility for a written plan, I don’t wait for remedial-amendment periods; I revise my client’s plan document in real time. For example, I delivered SECURE 2019 restatements in January 2020, and SECURE 2022 restatements in January 2023.

Also, an adviser might consider that a remedial-amendment period is a legal fiction for tax law, but does not impair a participant’s or beneficiary’s ERISA title I rights or rights the written plan provides.

A nongovernmental § 457(b) plan might not have needed much amendment.

[Belgarath]

G8 - I'd just like to confirm that I'm understanding what you are saying, as I think we are saying the same thing but stating it a little differently.

I'm saying that under the extended deadlines offered under 2024-2 guidance, there's no extension for the tax-exempt 457(b) plans - so they remain at the 12/31/25 deadline previously established. Agree/disagree? I just wanted to confirm that there has been no additional guidance that I missed. Thanks!

[30Rock]

Our plan document attorney confirmed this week that 457b top hat tax exempt SECURE 2.0 amendment is due 12/31/25, it was not extended.

[gc@chimentowebb.com]

Agreed. It seems to be 12/31/2025, so you should at least include the later RBD ages. If you offer installments to beneficiaries, you need the to be sure that installments are limited to 10 years for non-spouse adults and  annual withdrawals are required.

If anyone is still interested in RBDs for non-governmental 457(b)s can someone tell me why the RBD is not the later of the age or termination of service. I have read in various places that the RBD must be the April 1 following the applicable age, with no exception. I just can't find that in the Code or the regs.

[Peter Gulia]

My note above mistakenly suggests one might undo a before-the-month provision. I apologize; § 457(b)(4)(B) continues the before-the-month provision for a plan of a nongovernmental employer.

About minimum-distribution provisions, all or some changes might be unnecessary to the extent that the written plan states a provision by reference to Internal Revenue Code sections.

If that doesn’t obviate a need to consider a plan amendment about a required beginning date’s applicable age, whoever drafts a plan’s amendment or restatement might ask an employer whether it prefers to allow a delay up to age 73/75 or to compel a distribution based on some earlier age (for example, age 70½, or even the first day of “the calendar year in which the participant attains age 70½” [I.R.C. § 457(d)(1)(A)(i)]) or an earlier occurrence (for example, severance from employment).

Likewise, a plan sponsor might prefer to restrict a distribution to a period shorter than ten years.

Internal Revenue Code § 457(b)(5) refers to § 457(d)(2), which refers to § 401(a)(9). Accord 26 C.F.R. § 1.457-6(d) https://www.ecfr.gov/current/title-26/part-1/section-1.457-6#p-1.457-6(d). I see nothing there that precludes delaying a required beginning date until what follows from “[t]he calendar year in which the employee retires from employment with the employer maintaining the plan.” 26 C.F.R. § 1.401(a)(9)-2(b)(1)(ii) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-2#p-1.401(a)(9)-2(b)(1)(ii).