Catch-Up Rules That Apply to 457(b) Plans

“What are the catch-up rules that apply to 457(b) plans?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

The answer depends on the type of plan sponsor and is thus often a source of confusion. There are two types of catch-up elections for 457(b) plans: an age-50 catch-up rule, which operates in a fashion similar to the age-50 catch-up under 403(b) and 401(k) plans, and a special three-year catch-up, which is an election to catch-up on prior missed deferrals in the three years prior to normal retirement age that is unique to 457(b) plans. Check out this Ask the Experts column for additional information on the three-year catch-up election.

While governmental 457(b) plans can permit both the age-50 catch-up election and the three-year catch-up election, it should be noted that a participant cannot use both elections at the same time (effectively, the participant gets the larger of the two if eligible for both). For private-tax exempt employers, however, ONLY the three-year catch-up election is permitted; the age-50 catch-up election cannot be a provision of a private tax-exempt 457(b) plan. This is often a point of confusion, so plan sponsors and those who work with them will want to make certain that these provisions are properly communicated to 457(b) plan participants.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.