Changing Normal Retirement Age under Governmental 457(b) Plan

A governmental 457(b) plan that allows employees to designate their normal retirement age wants to establish normal retirement ages of 55 for "special risk" employees and 65 for all others.  Normal retirement age under the plan is meaningful only for purposes of the special 457(b) catch-up.  It does not play a role in vesting, as all contributions are 100% immediately vested; waiver of any allocation conditions, as there aren't any; or as a distribution trigger.

What limitations, if any, apply to the employer's ability to make this change?  For example, would its application be restricted to new participants only?

If the only effect of an Internal Revenue Code § 457(b)(3) normal retirement age is to fix which three years get the § 457(b)(3) deferral limit, it’s much simpler for a plan not to specify any age, and to provide that a participant may elect her normal retirement age within the range § 457(b)(3) permits.

26 C.F.R. § 1.457-4(c)(3)(v)(A) https://www.ecfr.gov/current/title-26/part-1/section-1.457-4#p-1.457-4(c)(3)(v)(A).

Following a worker’s job classification, defined-benefit pension rights, and other circumstances, a normal retirement age can be as young as 40 and as old as 70½.

Example: Martha will turn 70½ in 2027 and elects 2024-2026 as her “special section 457 catch-up” years.

Observe that a § 457(b)(3) deferral limit applies on the participant’s tax year, not any plan year.

Whether a plan amendment is precluded or must be limited is governed by the United States’ and the State’s constitutions and other State law. But an amendment that does not diminish any participant’s rights should be unobjectionable.