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Earliest Retirement Date and Catch-Up 457(b) Contributions

Q. A client is age 72, and has worked for three years for the employer, which adopted its 457(b) plan six years ago. The plan document says the normal retirement age (NRA) is the earliest point at which he could retire with an unreduced benefit under the state retirement system. That earliest date is the later of age 65 or five years of service. He would like to use the “last 3-year catch up” in his 457(b) plan. But what are the rules?

A. In his case, his NRA will occur after five years of service. He might be able to use the increased limit which is available in one, two or all three of the years before the NRA. Since he has only two years left before NRA, a calculation should be done to see if he has under-utilized the limit (this compares the annual 457(b) limit to the amount actually contributed during his three years of service). If he has, he is within the permitted period if he uses it for two years only.   

06/10/2014

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