"Although each state has its nuances, the following framework helps districts navigate plan implementation effectively: [1] Assess employee needs and interest ... [2] Review state law and governance structure ... [3] Define objectives and plan design ... [4] Select a provider or consortium ... [5] Adopt plan documents and implementation procedures ... [6] Coordinate payroll and recordkeeping systems ... [7] Launch and educate ... [8] Provide legislative updates for SECURE and SECURE 2.0." MORE >>
"For distributions prior to April 15, [although the IRS website] states that earnings on excess deferrals are reported on Form W-2, it is silent on the reporting on the excess deferral itself, other than to state that it is taxable. However, the Form 1099 instructions are quite clear that Form 1099-R should only be used for distributions from governmental 457(b) plans and not private tax-exempt 457(b) plans. Therefore, absent guidance, it is reasonable to reflect the full deferral amount, including excess amounts, in Box 12 (Code G) of Form W-2 in the year of the deferral (and the participant should report the excess amount on their Form 1040)." MORE >>
"For public schools, both the 403(b) and 457(b) are non-ERISA governmental retirement plans, meaning they are not subject to ERISA. While the two plans share many similarities ... [t]he ability to take penalty-free distributions upon separation -- regardless of age -- is one of the most significant advantages of the 457(b) plan." MORE >>
"The SECURE 2.0 changes that have most commonly been put into effect for such plans are [1] an increase in the small balance distribution limit from $5,000 to $7,000 and [2] an increase in the required minimum distribution age from age 72 under the SECURE Act of 2019 ... If a calendar year non-governmental 457(b) plan has operationalized either change, or both, a plan amendment will be needed to reflect the relevant changes by December 31, 2025[.]" MORE >>
"[1] General year-end action items ... [2] Retirement plan operational compliance (SECURE 2.0 deadlines).... Prepare for mandatory Roth catch-up implementation.... Address plan forfeiture balances.... Finalize tax-exempt 457(b) plan amendments.... Review and amend plan documents for discretionary changes.... Encourage participant data review.... [3] Health and welfare plan action items.... Evaluate the impact of the one big beautiful bill act (OBBBA) on plan design.... Strengthen group health plan fiduciary and cybersecurity practices." MORE >>
"401(k), 403(b), 457(b) plans: Automatic Roth designation for catch-up eligible participants earning over $150,000 (as adjusted for inflation) ... Group health plans: gag clause attestation." MORE >>
"[N]on-governmental 457(b) deferred compensation plans must be amended ... to account for: [1] Extensions relating to commencement of required minimum distributions (RMDs) ... [2] Implementation of the 10-year RMD Rule ... the December 31, 2025 deadline is unique to non-governmental 457(b) plans. " MORE >>
"[B]eginning January 1, 2026, if you participate in a governmental 457(b) plan, are age 50 and older and earned more than $145,000 (indexed annually) in the prior calendar year, you must make age-50 catch-up contributions on a Roth basis.... For governmental plans, especially those with multiple participating employers or those that may not have offered Roth contributions before, the Roth catch-up requirement introduces new complexity." MORE >>
"The most immediate operational problem is for 401(k), 403(b) and other DC plans that allow catch-up contributions.... Sponsors of tax-exempt governmental plans must make their changes by December 31, 2025, regardless of plan year. The Roth catch-up rule applies on a calendar-year basis, regardless of your plan year. Consequently, operational changes are needed by January 1, 2026 for all affected plans." MORE >>
"In 2022, employers were required to amend T-E 457(b) Plans to reflect changes to the required minimum distribution (RMD) rules made by the SECURE Act of 2019, known as SECURE 1.0, including the increase in a participant’s required beginning date (RBD) to age 72.... SECURE 2.0 made additional changes to the RMD rules[.]" MORE >>
"Nonprofit organizations often look for ways to attract and retain key executives through deferred compensation arrangements. Three common approaches are the 457(b) plan, 457(f) plan, and split-dollar life insurance plan. Each can supplement retirement benefits, but they differ in eligibility, funding, and tax treatment." MORE >>
"Tax-exempt sponsors must amend 457(b) plans by the December 31, 2025, deadline to comply with SECURE Act and SECURE 2.0 -- no extensions apply. RMD age increases, beneficiary rules, and automatic cash-out maximums may require updates; sponsors should align documents and operations now to avoid issues." MORE >>
"The deadline by which a plan sponsor must amend its retirement plans depends on the plan type. Here’s a list of the current amendment deadlines by plan type." MORE >>
"In 403(b) plans, employees with at least 15 years of service at eligible employers, such as public schools and certain nonprofits, may qualify for an additional catch-up contribution of up to $3,000 per year, capped at $15,000 total. The Roth catch-up requirement does not apply to these ... Similarly, for governmental 457(b) plans, the Roth requirement applies only to the extent catch-up contributions exceed the regular 457(b) limit." MORE >>
"[S]ponsors of tax-exempt 457(b) plans now face a short timeframe to implement amendments, such as the increase in the required minimum distribution age, which was first raised to 72 under the SECURE Act, then to 73 under SECURE 2.0 ... It is unlikely that the IRS will grant tax-exempt 457(b) plans a last-minute extension, especially given the government shutdown[.]" MORE >>
"A key decision for employers is whether to implement the deemed election process.... A plan may use either of the two new correction methods, but it must apply the same correction method to similarly situated participants.... The deadline to correct a failure using these correction methods depends on which limit is the basis for the redesignating pre-tax deferrals as catch-up contributions.... Special rules apply to dual-qualified plans (plans qualified under both U.S. and Puerto Rico law). " MORE >>
"457(b) plans ... were neglected and excluded from the IRS Notice that extended the amendment deadline for other plans and governmental sponsors of 457(b) plans from the end of 2025 to the end of 2026.... Tax Exempt 457(b) Plans must be amended by the end of this year for the new RMD ages and it doesn't appear there will be any further extensions." MORE >>
"For non-profit plan sponsors of 457(b) plans, this is an important opportunity to not only satisfy the required updates but also to review any additional changes to conform the plan document to intended plan design and operations going forward. Amendments must be formally adopted by December 31, 2025, and plans should operate in accordance with the updated provisions to avoid compliance problems." MORE >>
"If you have made any of the following changes in operation to your plan, an amendment is necessary by year end: [1] RMD age ... [2] Roth distributions ... [3] Small benefit amount ... [4] Unforeseeable emergencies." MORE >>
"Nongovernmental Code section 457(b) plans are a simple way for nonprofits to offer key employees a way to defer compensation in excess of the limits under their organizations' section 403(b) or 401(k) plan. For larger nonprofits, a section 457(b) plan is frequently offered in conjunction with an individually tailored, separate Code section 457(f) plan to attract and retain key employees." MORE >>
"In light of the IRS' proposed regulations and the FTC's pending noncompete ban, plan sponsors ... face increased compliance risk. These employers must closely assess whether noncompete provisions used to structure [substantial risks of forfeiture (SRFs)] remain enforceable under state law and whether they satisfy the IRS' standard for deferral eligibility." MORE >>
"There is only one limit -- currently $23,500 (not including any eligible catch-up contributions) -- that applies to the combination of employer contributions and employee elective deferrals to a 457(b) plan, meaning that employer contributions limit the amount available for employee elective deferrals." MORE >>
"[T]he IRS' preamble to the proposed regulations suggests that a high earner who is eligible for both the special 457(b) catch-up and the age 50 catch-up may make pre-tax contributions up to the amount of their underutilized deferrals. Only the portion of catch-up contributions that exceeds the participant's available special catch-up limit, and is therefore made under Section 414(v), must be made as Roth contributions." MORE >>
"Code section 4960 imposes a 21% excise tax on tax exempt organizations ... that pay a 'covered employee' compensation over 1 million dollars in a given year (Threshold). The tax only applies to the compensation in excess of the Threshold.... Compensation ... includes any other compensation not paid in the year in question, to the extent it would be considered vested ... This would include such things as bonuses, severance pay, and benefits under 457 plans." MORE >>
"The SECURE 2.0 Act will almost certainly motivate the remaining 7% of plan sponsors who do not yet offer a Roth deferral option to offer designated Roth accounts. Find out why by following this 'soup-to-nuts' listing of 55 things to know about Roth designated accounts in qualified plans[.]" MORE >>
