Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My government employee client is nearing retirement.  She has been eligible to participate in a 457(b) deferred compensation plan, but has not done so in the past.  In her last two years of employment, she will be eligible to receive more compensation than she will need.  Is she eligible to make special catch-up contributions to the Section 457(b) plan?

Answer:  Yes, if she otherwise qualifies.  If the applicable year is one of a the participant’s last three calendar years ending before the year in which the participant attains normal retirement age, she can use the special catch-up provision.

The special catch-up provision permits a governmental Section 457(b) plan participant to double the amount of the normal deferral if the participant failed to fully take advantage of deferrals in prior working years after 1979.

If the participant was previously eligible to participate in a 457(b) plan but did not choose to participate, she can potentially use the under-contribution for those non-participation years in her special catch-up.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.