Reminders for Tax-exempt Co-ops Offering 457(b) Plans
As we near the end of the year, there are two important reminders for individuals participating in non-qualified deferred compensation 457(b) plans.
Required minimum distributions for 2018
Don’t forget, former employees and directors who reached age 70½ or older this year and are participants in your cooperative’s 457(b) Plan must take their required minimum distributions by December 31 for the 2018 tax year. You can help your plan participants by reminding them of the deadline and the potential penalty if they fail to take a required minimum distribution.
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a penalty equal to 50% of the difference between the required minimum distribution amount and any amount distributed or withdrawn from an individual’s account for each tax year.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 required minimum distribution.
Maximum contribution limits
Be sure to take action and verify compliance with 2018 maximum contribution limits for your plan participants before year end.
- Co-ops sponsoring tax-exempt or governmental non-qualified deferred compensation 457(b) plans for employees or for directors need to cap salary deferrals at $18,500 for 2018. 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 $18,500.
- 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 non-qualified 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 2018. Please note: 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—in the same year. IMPORTANT: Age 50 and older catch-up contributions are not allowed for 457(b) plans sponsored by tax-exempt co-ops that are not government-owned utilities.
Questions?
Please contact the Deferred Compensation Program team by email at deferredcomp@nreca.coop or by phone at 703.907.6375.