NRECA Employee Benefits Weekly

SECURE Act Provisions Change Required Minimum Distribution Rules for Nonqualified 457(b) Plans for Employees and Directors

Posted on Posted in Deferred Compensation Plans

Signed into law on December 20, 2019, the Setting Every Community Up for Retirement (SECURE) Act modifies the required beginning date for mandatory 457(b) plan distributions. The nonqualified deferred compensation plans impacted include:

  • Executive Compensation 457(b) Plan for Employees/Directors;
  • Global Executive Compensation Plan for Employees/Directors; and the
  • Governmental Deferred Compensation 457(b) Plan.

Before the SECURE Act, distributions from 457(b) plans had to commence by April 1 following the later of: (i) the calendar year in which the participant attained age 70½, or (ii) the calendar year in which the participant retired. After enactment, this continues to be the rule for all participants who turned 70½ on or before December 31, 2019. For those who turn age 70½ after December 31, 2019, the triggering age increases to the later of age 72 or severance of service. 

If your cooperative sponsors a 457(b) plan (or plans) and would like to allow your participants to use the later required beginning date, you must re-adopt or amend your plan document to incorporate the SECURE Act change. 

The NRECA Deferred Compensation team will contact your co-op within the next few weeks via email or phone to start the discussion. The team is available to help you further understand this legislative change and to help you determine whether your co-op’s next step should be a plan amendment or a plan re-adoption. In both cases, we can provide sample documents and board resolutions to make this plan change relatively simple to implement.

Please note: Changes under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, such as waiving required minimum distributions in 2020, apply to 401(k) and governmental 457(b) plans and do not apply to Executive Compensation 457(b) Plans. The Deferred Compensation Program team will reach out to sponsors of affected plans directly concerning the CARES Act.

Please feel free to contact the Deferred Compensation Program team directly at 703.907.6375 or deferredcomp@nreca.coop with any questions.

The preceding summary of the legislation is not intended to constitute legal advice. Please consult your co-op’s legal advisor for guidance.

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