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All News > 457 Plans

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SECURE 2.0 Changes for 457(b) Plans
National Tax-Deferred Savings Association [NTSA] Link to more items from this source
[Guidance Overview]
Mar. 22, 2024

"What changes did SECURE and SECURE 2.0 make to the significance of age 70½? Lower the in-service distribution age ... Increase in the RMD beginning age ... What 457(b) plan provisions related to age 70½ did not change? Normal retirement age (NRA) ... Discussion of special 3-year catch-up ... Application of the NRA rule."

Tags: 457 Plans  •  Required Minimum Distributions (RMDs)  •  Retirement Plan Administration  •  Retirement Plan Design

To 457(b) or Not to 457(b): Rules to Keep Your Plan Compliant
Foley & Lardner LLP Link to more items from this source
[Guidance Overview]
Mar. 20, 2024

"Nonprofits that fail to administer their Code Section 457(b) plans correctly from day one risk losing their plans' tax-favored status. Following these five rules may help Nonprofits avoid that headache. [1] Keep it small(ish) ... [2] Know your limits ... [3] Don't forget the FICA ... [4] No to loans; but yes to unforeseeable emergencies ... [5] The devil is in the distribution rules."

Tags: 457 Plans

Plan Sponsor Considerations for Roth Employer Contributions
Watkins Ross Link to more items from this source
Mar. 1, 2024

"Even if you currently allow Roth deferrals, you are not required to offer Roth Employer contributions. You can offer this option even if your plan does not offer Employee Roth deferrals. An employee must irrevocably elect Roth treatment for matching and nonelective contributions before they are allocated to their plan account."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Design  •  SECURE 2.0

Nongovernmental 457(b) Plans and Rollovers: The Two Don't Mix
Retirement Learning Center, LLC Link to more items from this source
[Guidance Overview]
Feb. 23, 2024

"[A] nongovernmental 457(b) plan (e.g., a plan maintained by a nonprofit hospital) is not an eligible plan for rollover purposes ... For nongovernmental 457(b) plans, the only way to defer taxes would be through a direct transfer to another 457(b) plan of a tax-exempt entity[.]

Tags: 457 Plans  •  Rollovers

Deferred Compensation Arrangements for Non-Profits
Holland & Hart LLP Link to more items from this source
Feb. 6, 2024

"While there are a number of differences between a Section 457(f) plan and a for-profit deferred compensation plan, the biggest is the timing of the taxation of the deferred compensation. A for-profit deferred compensation plan can be designed so that once the right to deferred compensation vests, it can be taxed (for income tax purposes) on the date that it is paid, which can be many years in the future. With a Section 457(f) plan, once the deferred compensation vests, it becomes immediately taxable, even if the plan provides for payment of the deferred compensation in a future year."

Tags: 457 Plans  •  Executive comp  •  Nonqualified Plans

Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities
Venable LLP, via LexisNexis Practical Guidance Link to more items from this source
[Guidance Overview]
Dec. 28, 2023

"This practice note explains the application of Internal Revenue Code Section 457A, which restricts the ability of certain tax-indifferent entities (so-called nonqualified entities) to defer compensation for services provided by their service providers. It provides guidance on practical steps for attorneys advising such entities on nonqualified deferred compensation plans."

Tags: 457 Plans  •  Nonqualified Plans

Substantial Risk of Forfeiture Under the Internal Revenue Code
Venable LLP, via LexisNexis Practical Guidance Link to more items from this source
[Guidance Overview]
Dec. 27, 2023

11 pages. "This practice note discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, 3121(v)(2), and 4960 of the Internal Revenue Code and the different consequences of the failure to achieve a SRF under each such section. SRF is the standard that the [Code] and Treasury Regulations apply to determine when an employee's or an independent contractor's deferred compensation vests, and therefore may be includable in income for the individual (or deductible for the employer or other controlled group member granting the compensation)."

Tags: 409A Plans  •  457 Plans  •  Executive comp  •  Nonqualified Plans

Common Mistakes in 457 Plans of Tax-Exempt Organizations
Hall Benefits Law Link to more items from this source
[Guidance Overview]
Oct. 26, 2023

"[C]onfusion still exists between 457(b) plans and 457(f) plans ... As top hat plans, [exempt organization (EO)] 457(b) plans need not file an annual Form 5500 return but must file a one-time top hat statement with the [DOL]. EO 457(b) plans also have special rules about elective deferrals by participants ... 457(b) plans have an annual contribution limit for 2023 of $22,500, which happens to be the same as the contribution limit for a 401(k) or 403(b) plan. However, these are independent and separate contribution limits."

Tags: 457 Plans  •  Retirement Plan Design

Considerations for Design and Operation of Deferred Compensation Plans for Executives of Tax Exempt Organizations, Part 2 (PDF)
Trucker Huss Link to more items from this source
[Guidance Overview]
Oct. 17, 2023

"[This] article will discuss in more detail ineligible 457(f) Plans that don't meet the requirements to be a 457(b) Plan, and how Internal Revenue Code sections 4958 and 4960 excise taxes apply to EO deferred compensation plans."

Tags: 457 Plans

Designing and Operating Deferred Compensation Plans for Executives of Tax Exempt Organizations, Part 1
Trucker Huss Link to more items from this source
Sept. 29, 2023

"[T]his article will discuss many of the requirements for eligible 457(b) plans sponsored by tax exempt organizations and how they differ from 457(b) plans sponsored by state or local governmental entities. It will also discuss areas where mistakes can easily be made.... It will also discuss the application of the excess benefit transaction rules and Code section 4960 excise tax to deferred compensation."

Tags: 457 Plans

The Evolution of Hardship Distributions
TRI-AD Link to more items from this source
[Guidance Overview]
Sept. 14, 2023

"Effective in 2023, a participant can self-certify that the distribution is not in excess of the amount required to satisfy the financial need, and the participant has no alternative means reasonably available to satisfy the financial need. Similar rules will also apply to distributions from a governmental 457(b) plan due to an 'unforeseeable emergency' of a participant.... For plan years beginning after December 31, 2023, 403(b) plans will now be treated the same as 401(k) plans, meaning that 403(b) plans may also allow hardship withdrawals of employer contributions and historical earnings."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Misc. Distribution Issues

Ten Common Mistakes in 457 Plans of Tax Exempt Organizations, Part 2
Trucker Huss Link to more items from this source
[Guidance Overview]
Sept. 6, 2023

"[6] Failing to amend plans.... [7] Income taxation of 457(f) plans.... [8] FICA taxation of 457 plans.... [9] Code Section 409A.... [10] Excise tax on compensation above $1,000,000." [Also see Part 1]

Tags: 457 Plans

Common Mistakes In 457 Plans of Tax Exempt Organizations, Part 1
Trucker Huss Link to more items from this source
[Guidance Overview]
Aug. 15, 2023

"[1] Confusion with state & local government plans.... [2] Confusion between 457(b) and 457(f) plans.... [3] Top hat requirement.... [4] Monthly elective deferral rule.... [5] Contributing too much to 457(b) plan." [Also see Part 2]

Tags: 457 Plans  •  Retirement Plan Administration  •  Retirement Plan Design

The Two Types of 457(b) Plans
Slott Report Link to more items from this source
June 21, 2023

"[T]here are two types of section 457(b) retirement plans -- governmental plans for state and local municipal workers, and 'top hat' plans for highly-paid and managerial employees of tax-exempt employers like hospitals.... [T]he two types of plans are different in several important ways. One of the major differences has to do with rollovers."

Tags: 457 Plans  •  Rollovers

Code Section 457(f) Conundrum: How to Handle Past Year Mistakes (From Vesting) (PDF)
The Wagner Law Group, via LexisNexis Practical Guidance Link to more items from this source
[Guidance Overview]
Apr. 17, 2023

"What happens when a Tax-exempt Employer discovers that non-qualified plan (or severance-related agreement) violates 457(f) by providing for the vesting of benefits before the year in which payments occur? ... [T]here may be more than one reasonable tax position that draws from [published] IRS advice[.]"

Tags: 457 Plans

Pros and Cons of Government 457(b) Retirement Plans
Bankrate, via MSN News Link to more items from this source
Apr. 13, 2023

"The 457(b) retirement plan offers many advantages to government workers, including tax-deferred growth of their savings, but these plans do come with some drawbacks. Here's how the 457(b) plan works and what you need to watch out for."

Tags: 457 Plans  •  Retirement Plan Design  •  State and Local Government Plans

SECURE 2.0: DB Plans, Simple, IRA, 403(b)/457 Plans (PDF)
Retirement Management Services, LLC Link to more items from this source
[Guidance Overview]
Feb. 6, 2023

8-page chart summarizes SECURE 2.0 provisions and their effective dates.

Tags: 403(b) Plans and Annuities  •  457 Plans  •  SECURE 2.0  •  SIMPLE 401(k), SIMPLE IRA Plans

Benefits Issues Facing Higher Education Institutions
Bradley Link to more items from this source
Jan. 24, 2023

"[1] Politics and communication ... [2] ACA and school year contracts ... [3] Student employees ... 4. 457(b) plans ... [5] Retiree medical benefits."

Tags: 457 Plans  •  Health Plan Design  •  Retiree Health Plans

SECURE 2.0 Changes Specific to Plans of Tax-Exempt Organizations
Murphy Austin Link to more items from this source
[Guidance Overview]
Jan. 19, 2023

"457 RMD amendment deadline extended.... 403(b) changes: [1] MEPs and PEPs ... [2] Collective Investment Trusts.... [3] Hardship withdrawals.... [4] Long term part-time employees."

Tags: 403(b) Plans and Annuities  •  457 Plans  •  SECURE 2.0

SECURE 2.0 in 2023 and Beyond
Eversheds Sutherland Link to more items from this source
[Guidance Overview]
Jan. 10, 2023

"Effective immediately, employers can permit participants ... to elect that matching or non-elective contributions are made as Roth (after-tax) contributions.... Roth matching or non-elective contributions will, of course, result in taxable income to the participant, including a tax withholding requirement. Employers will need to work out how to satisfy this tax withholding from other compensation paid to the employee or through other means[.]"

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE 2.0

More Roth, More Catch-Up, and Catch-Up as Roth: SECURE 2.0
Jackson Lewis P.C. Link to more items from this source
[Guidance Overview]
Jan. 9, 2023

"Effective now (i.e., the date of enactment of SECURE 2.0), Section 402A of the tax code permits 401(k), 403(b), and governmental 457(b) plans to permit employees to elect to have employer matching or nonelective contributions treated as designated Roth contributions.... Starting in 2025, participants who are age 60, 61, 62, and 63 will be subject to a higher catch-up contribution limit.... SECURE 2.0 amends the catch-up contribution rules to require certain highly paid workers to contribute all of their catch-up contributions as Roth contributions starting in 2024."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Retirement Plan Design  •  SECURE 2.0

End of the Year Amendment Requirement for 457(b) Plans of Tax-Exempt Organizations
Boutwell Fay LLP Link to more items from this source
[Guidance Overview]
Dec. 1, 2022

"The only provision of the Acts that requires an amendment to a 457(b) plan is the change in the required minimum distribution rules (RMDs) enacted under the SECURE Act. The SECURE Act changed the date that RMDs are required to begin for most employees who were born on or after July 1, 1949, from 70½ to 72. The SECURE Act also made significant changes in the requirements for distributions to beneficiaries."

Tags: 457 Plans  •  Retirement Plan Amendments

Year End SECURE Act Deadline Looms for Tax-Exempt 457(b) Plans
E is for ERISA Link to more items from this source
[Guidance Overview]
Nov. 2, 2022

"Despite an extension granted to qualified plans, Section 403(b) plans, and governmental Section 457(b) plans to make necessary amendments under the SECURE Act, no extension past December 31, 2022 currently applies for Section 457(b) plans maintained by private tax-exempt organizations.... [A]bsent future guidance from IRS, these plans must be amended by the end of this year to incorporate the SECURE Act's changes to required minimum distribution provisions."

Tags: 457 Plans  •  Retirement Plan Amendments  •  SECURE Act

Amending a Governmental Employer's 457(b) Plan for SECURE and CARES
VOYA Financial Link to more items from this source
Sept. 30, 2022

"Best practices: [1] Assess state/local law to conform to SECURE and CARES provisions. [2] Coordinate with your plan document provider on required and optional plan design features. [3] Authorize an individual to be responsible for timely adopting plan amendments to the 457(b) plan and ensure that the plan amendment is timely signed. [4] Maintain the plan document, including amendments, in a secure location."

Tags: 457 Plans

What's My Limit? Contributions to Both a 403(b) and a Governmental 457(b) Plan
Retirement Learning Center, LLC Link to more items from this source
[Guidance Overview]
Sept. 26, 2022

"Since 2002, contributions to 457(b) plans no longer reduce the amount of deferrals to other salary deferral plans, such as 401(k) or 403(b) plans. A participant's 457(b) contributions need only be combined with contributions to other 457(b) plans when applying the annual contribution limit.... Consequently, an individual who participates in both a governmental 457(b) plan and one or more other deferral-type plans, such as a 403(b), 401(k), salary reduction simplified employee pension plan, or savings incentive match plan for employees has two separate annual deferral limits."

Tags: 403(b) Plans and Annuities  •  457 Plans

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