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Contributions to a 457(b) Plan

Q. You have a client that knows that contributions to a 457(b) plan can begin in the calendar month only if the salary reduction agreement is received on or before the first day of that month. But what happens if the client hired a new employee on Aug. 17, 2015 and the new employee signed the deferral agreement on Sept. 3, 2015. Can that employee’s deferrals begin in September or do they have to wait till October like everybody else?

A. Treas. Reg. §1.457-4 says, in part, “A new employee may defer compensation payable in the calendar month during which the participant first becomes an employee if an agreement providing for the deferral is entered into on or before the first day on which the participant performs services for the eligible employer.”

Thus, it appears that in the particular case cited above, the participant can begin deferrals in October, not September!

09/24/2015

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