NRECA Employee Benefits Weekly

Reminders for Deferred Compensation 457(b) Plans for Tax-exempt Co-ops

Posted on Posted in Deferred Compensation Plans, Retirement Benefits

As we near the end of the year, there are two important reminders for individuals participating in Deferred Compensation 457(b) Plans.

Required minimum distributions for 2017
Don’t forget, required minimum distributions (RMD) must be withdrawn by December 31 for the 2017 tax year. You can help your former employees and directors participating in your cooperative’s 457(b) Plan by reminding them of the deadline and the potential penalty if they fail to take an RMD.

Failure of the participant to take a withdrawal of the minimum amount required could result in a penalty equal to 50% of the difference between the RMD amount and any amount distributed or withdrawn from an individual’s account for each tax year.

Participants should contact their personal financial and/or tax advisors for help in determining the amount of the RMD.

Maximum contribution limits
Be sure to take action and verify compliance with 2017 maximum contribution limits for your plan participants before year end.

  • Cooperatives sponsoring tax-exempt or governmental deferred compensation 457(b) plans for employees or for directors need to cap salary deferrals at $18,000 for 2017. If an individual participates in one or more 457(b) Plans—as an employee or a director—their combined total deferrals for the current year cannot exceed $18,000.
  • Employees and directors participating in a plan may be eligible for special catch-up contributions during each of the three years prior to, but not including, the year they reach normal retirement age for the co-op’s primary retirement plan. Reminder: NRECA will calculate a participant’s special catch-up contribution amount upon request.
  • Participants in deferred compensation 457(b) plans of government-owned utilities may also take advantage of the age 50 and older catch-up contribution option. The limit is $6,000 for 2017.  Please note: this option is not allowed for 457(b) plans sponsored by tax-exempt co-ops that are not government-owned utilities.

IMPORTANT: Participants who are eligible for both the special catch-up and age 50 and older contribution options may choose either one of the two options – not both.

Questions?
Please contact the Deferred Compensation Program team by email at deferredcomp@nreca.coop or by phone 703.907.6375.

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